You should ditch your credit card and use a ‘buy now, pay later’ plan instead

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There are pros and cons to going that route.

If you’ve been hearing a lot about “buy now, pay later” or BNPL plans, there’s a reason for it. These plans have become more popular with consumers over the last few years due to their advantages over credit cards.

For one thing, a BNPL plan allows you to avoid interest on your purchases entirely by simply adhering to your payment agreements and paying in installments on time. Also, instead of applying for a new credit card and waiting for approval, he can qualify for the BNPL plan on the spot.

But should BNPL plans replace credit cards? Not necessarily.

not a perfect solution

A BNPL plan works like a mortgage. You pay a down payment for the items you want to buy, and pay the rest of the purchase amount progressively.

There are only significant differences between BNPL plans and mortgages and other installment loans. BNPL plans typically require you to pay off your purchases in a short period of time (often 12 weeks or less). And it doesn’t give you that much wiggle room.

Let’s say your washing machine breaks down and you need a new one. But he can’t afford to drop $900 on the spot. If you charge your credit card for the washing machine but don’t pay off the balance by the bill’s due date, you’ll start accruing interest on the balance. If you used a BNPL plan to purchase that washing machine and paid it off within 3 months (or whatever your BNPL plan requires), you won’t accumulate any interest.

But if you can’t shake off the $900 washing machine cost today, chances are you won’t magically make money in the next few weeks. As a result, the BNPL contract may be delayed and start accruing interest and fees.

Additionally, not adhering to a BNPL plan will be reported as negative activity on your credit report, similar to being harassed for late credit card payments. On the other hand, if you make a minimum credit card payment, it will be considered paid on time.

Miss out on various perks

Not only are BNPL plans risky, these contracts do not allow you to earn rewards or get cash back on purchases like you can with credit cards. So if you buy a must-have item like a washing machine, you’d better get something out of it.

Overall, BNPL plans can be a good solution in limited circumstances, but they are not ideal. And it doesn’t necessarily have to be a replacement for swiping a credit card.

If you’re buying something that you’re really confident will pay off in 2-3 months, and you want to avoid credit card interest, a BNPL plan might be for you. However, if you decide to sign up for one of these deals, first study the details carefully to understand what you’re doing and avoid any surprises.