Should You "Buy Now, Pay Later?"

One of the most popular ways to pay for something over the past few years is the “buy now, pay later” (BNPL) system. A common BNPL method will allow you to purchase and receive an item now, and pay the bill with four equal payments made in bi-weekly or monthly increments.

One positive for the customer is if he makes all the payments on time and by the deadline, he won’t pay any fees or interest. Not every BNPL option allows this, but many do. And this is stunning, really, when you think about it. I’m so used to businesses tacking on all kinds of fees, taxes, and interest charges that I couldn’t believe it when I read it at first.

If, however, you are late with a payment, or you don’t pay the item off in time, you likely will be hit with a large fee or interest. So if you do use a BNPL app to pay for something, make sure you make every payment on time.

The problem with BNPL is every time you use that method, you are going into debt. If you only use BNPL every now and then and you always pay off the purchase on time, then it won’t be a big deal. Your finances will be fine.

But if you love the convenience of BNPL and use it for nearly every purchase, soon you’ll have accumulated quite a bit of debt. You may be responsible for a couple dozen or more payments every other week. If you lose track of them, you might find yourself in trouble.

It’s likely you won’t even know how much money you owe for all of your purchases.

Indeed, this is one of the reasons the US Consumer Financial Protection Bureau recently announced it is investigating the BNPL system. It’s concerned that consumers don’t entirely understand how BNPL methods work, and that they may end up spending more money than they intended.

While I’m not in favor of using BNPL for small purchases that are non-essential, I can see using that method if you are hit with a sudden medical bill that you can’t pay in full.

One option for this situation would be to use a credit card like CareCredit.

CareCredit is a credit card specifically for medical expenses for your family and your pets. I don’t usually promote the use of credit cards, but I like this one mainly for this reason: According to its website (www.carecredit.com), CareCredit allows you to pay off a medical expense over time without incurring any interest.

To take advantage of this option, you would choose the length of time to pay the bill: 6, 12, 18, or 24 months. If your bill is $200 or more, you will pay no interest as long as you make the minimum monthly payments and pay the full amount by the end of the promotional period.

If you don’t meet those terms, then interest is charged from the original purchase date. Make sure you understand this last point. If they charge you interest, it will be from the original purchase date, not from the first date you missed a payment.

To be clear, the best way to pay a medical bill you weren’t expecting is with cash from your emergency fund. Or you could pay it with a traditional credit card to get the reward points, then pay it off within one month with cash from your emergency fund to avoid paying interest.

If you don’t have an emergency fund, then using a card like CareCredit is a good second option. Just be sure you pay your bill every month on time, and make sure you pay the total amount by the end of the promotional period, otherwise you will pay a significant amount of interest.

So if you find yourself tempted to pay for small purchases or for non-essential purchases with BNPL, resist the urge. Just pay with cash. You’ll stay out of debt, and stay on top of your finances.

If you have a sudden medical bill and are forced to borrow money to pay it, however, CareCredit is a good option.

And if you do decide to use BNPL for smaller purchases, I’m not saying your financial world will collapse. Just be careful.

If the US Consumer Financial Protection Bureau finds the “buy now, pay later” method questionable enough to launch an official investigation, we should all think twice before using it.