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Affirm, Klarna, Afterpay — While shopping online or at certain retailers, you may come across these popular Buy Now Pay Later (BNPL) companies. BNPL has skyrocketed in popularity during the pandemic and has become a highly sought-after option for holiday shopping last year. In fact, according to a 2022 survey by the Electronic Transactions Association and the Strawhecker Group, 20% of Americans planned to use his BNPL while on vacation, and another 20% had given it up.
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But now that the holiday rush is over and the first BNPL payment is due, buying a gift without paying up front may be less appealing. If he used BNPL for holiday season purchases, here are the best ways to start making payments as soon as possible, according to financial experts.
Check your account and budget
If you don’t already have one, check your BNPL account to fully understand the terms, interest rates, late fees and repayment schedule. This helps you figure out how much you owe overall and how quickly you need to pay it back, explains his Alastair Hazell, founder of the financial education resource The Calculator Site.
Next, we need to create a budget.
“Determine how much you can realistically afford to pay for your BNPL balance each month and create a budget that will help you allocate your money wisely,” he said. “But be sure to leave room for other expenses and emergencies.”
pay more than the minimum amount
BNPL options vary in terms of rates, fees, and payment schedules, but often require full repayment within 30 days to 12 months. But Tatiana Tsoir, a CPA, personal finance coach and author, recommends paying off holiday season purchases in six months at most.
“Take the total amount you owe, divide by six, and pay the resulting monthly payment, not just the minimum amount,” she said. Not only that, but you can avoid interest and give yourself six months until the next holiday season.”
Plus, if your provider charges interest, paying your balance early can save you money in the long run.
Mina Tadrus, CEO of Tadrus Capital, said:
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Suspension of discretionary spending
BNPL may be better suited for large or unexpected purchases, while credit cards may be better suited for small, everyday purchases, said the CEO of BNPL company Wisetack. One Bobby Tzekin said. However, if he’s ever used BNPL while on vacation, I’d recommend making a short-term plan to pay off everything, even if it means putting other purchases on hold temporarily. .
“Depending on individual financial circumstances, it may make sense to withhold short-term discretionary spending after the holidays and instead use that money to pay off holiday purchases.” He said.
Consider consolidation
Did you shop for the holiday season on multiple BNPL accounts? If so, you may find that some of them have higher interest rates or fees. In this case, high-cost BNPL balances Consider consolidating into one low-interest loan.
“This makes payments easier to track and saves interest,” says Hazel.
consider alternatives for next year
Using BNPL on holidays has several advantages. If you don’t have cash to prepay for the item, you can still take advantage of the holiday sale. Also, many of his BNPL companies do not charge interest, so it may cost less than using a credit card, Tadrus said.
However, if purchasing holiday BNPL results in significant fees, interest, or wastage, you may want to consider using other methods during the next holiday season. Here are some alternatives to consider:
- credit card: If your credit card has an APR of 0%, it might make more sense to use your credit card for holiday gift purchases instead of BNPL.
- Save in advance: Planning your holiday shopping months in advance can be a hassle, but it can help reduce the stress of paying off short-term debt.
- Reserve: If you find an item you like but don’t have room for it yet, ask the store to hold it for a few weeks.
- Personal loan: Personal loans are also available for holiday shopping. Fixed interest rates and repayment terms can make it easier to budget and plan payments, Hazell said.
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