It was last year, as I perused the Wonderful ~Virtual~ Land of Sephora and added another Morphe eyeshadow palette to my collection, that I first came across the payment option that’s supposedly now Cool With The Kids.
At the bottom of the checkout screen, I was offered the choice of paying in four interest-free installments of $16 via PayBright rather than shelling out the full $64 upfront.
Since then, I’ve spotted Afterpay at Roots, Sezzle at Laura and Uplift at several travel companies.
Now, for someone in desperate need of that next paycheque — and something more indispensable than a 9D Painted Desert Artistry Palette — that kind of option might sound like an absolute godsend. So, why don’t I ever want to Buy Now, Pay Later?
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The BNPL breakdown
Let’s start by breaking down how these Buy Now, Pay Later (BNPL) programs actually work.
When you purchase something from a retailer using BNPL — either online or in-store — the BNPL provider pays the retailer the full amount for you. Then it’s your responsibility to pay the provider back what you owe.
This could be in biweekly “pay in four” installments, like I was offered, or split into smaller chunks over a longer period of time.
It’s kind of like taking on a small loan, except you don’t usually have to pay any interest on your debt. Take that, credit cards — those often top 20% APR (yikes).
And unlike a credit card, pretty much anyone can use it. You don’t need to build up a good credit score to qualify for many services, so it’s a rare no-fuss option for young people, newcomers and people who have a rough history with credit.
What happens if you miss a payment? Here’s something crazy: With some providers, like PayBright, you don’t even get charged for skipping out on a payment. You’ll just get blocked from making any future purchases until your bill is paid.
So what gives?
You might be thinking: Where’s the downside? It sounds like the worst thing that could happen is a momentary slap on the wrist.
Well, not every BNPL service follows the same rules. Not every purchase works the same, either.
That zero-interest thing? Err … There may actually be some interest or processing fees involved, depending on the store you’re buying from and the provider you’re using.
No late fees? Not universal. Sezzle will temporarily deactivate your account after a missed payment until you pay a $10 fee. Even if you’re proactive and try pushing off payments until a later date, you’ll eventually start incurring a $5 fee for that, too.
Those fees could add up over time — please, my friends, set those calendar reminders! — but, what’s even worse is the potential damage to your credit score.
Don’t let your score down
While it’s true that BNPL providers don’t care as much about your credit score — that neat little number that shows banks whether you can be trusted with good deals — there are some exceptions.
For example, you won’t get hit with a hard credit check when you opt to pay-in-four with PayBright, but you will get checked if you go with equal monthly payments instead. Whether you pass or not, a hard credit check can temporarily dent your score.
And even though PayBright promises not to tattle to the credit bureaus — you know, the guys who decide your credit score — about missed payments, that can change if you purchased something particularly pricey. (Like a $300 flat iron, for example.) Big unpaid bills can still get sent to debt collectors, and that can definitely trash your score.
Lastly, if you’re a high-functioning member of society who always pays their bills on time, you actually want your payments to be reported to the bureaus.
If you were purchasing an item with a credit card, paying your balance on time and in full would help build your credit score. You’ll probably miss out with BNPL, though you can try asking the company to report your payments.
When it comes down to it…
You seriously need to read the fine print when dealing with BNPL companies. But even if you check things out and everything really is as dreamy as it seems, I’d still be a bit leery of using them. Even with zero interest and no late fees.
I know myself. I’m a creature of habit and I know that once I start going with split payments, it’ll be hard to stop myself from shopping even more. (I’ve seen Confessions of a Shopaholic, I know how this goes.)
You don’t want to get so mesmerized by those small installments that you forget how much you’re spending and how much you owe next week.
I didn’t select the interest-free BNPL option for my Sephora purchases because I knew I could manage the full payment upfront. It’s easier for me, personally, to force myself to a tighter payment schedule so I can keep track of exactly where my money’s going.
The Thing Is: You shouldn’t buy stuff from Sephora — or whatever retailer you love — if you don’t have the cash to pay right away. Stick to your guns and wait until you can really afford it … or until the next good clearance sale.