Why You Might Want To Beware Of ‘Buy Now Pay Later’ This Holiday Season

It’s tempting. You’re inundated with huge deals and discounts popping into your inbox throughout the day – from LoveShackFancy to Anthropologie to Sephora and more. How does it happen? Like some kind of sorcery, you’ve suddenly got quite a few online shopping carts full of goods you just have to have. Maybe TikTok fashion hauls and skincare hacks made you do it, but whatever the reason truly is that you’re browser window shopping, you should probably hit the brakes before you fill your cart too full and end up relying on “Buy Now, Pay Later,” or BNPL.

There’s No Such Thing As Free Money

TikTok haulers swear by it to pay for their huge blowouts on fast fashion or the trendiest Korean beauty or skincare products. BNPL services allow you to spend to your heart's content without draining your checking account or filling up your personal credit cards. 

Over one-third of American consumers have already used a BNPL service, but only about one-fifth understand how they work. A lot of BNPL apps don’t charge interest on your payment at first but then will charge interest after a period of time and occasionally at higher rates than your typical credit card. Additionally, if you don’t make a payment on time or if your bank account doesn’t have sufficient funds, you can get slapped with late fees. 

Just as a word of warning, even though it’s not a credit card being used, late payments will affect your credit score because credit scores are used to determine whether or not you’re a reliable borrower. This can work in your favor too; for example, if you’re looking to better your credit score, you could use BNPL and make payments on time or early, which alerts banks that you can reliably borrow their money, but some sources say that BNPL payments actually don’t do much for your score.

Instead of opting for a credit or debit card at checkout, “buy now, pay later” programs give shoppers an appealing option to spend above what they have because they can spread out their payments. Some retailers actually partner with BNPL companies, which boosts their revenues because shoppers feel encouraged to buy more, more often. On top of that, they’re buying more expensive products too! BNPL company Affirm once reported that their users spend about $365 per single item purchase with BNPL.

Last year alone, Americans spent over $20 billion using BNPL. It’s more common among younger generations like my own, Gen Z, which spent 925% more in short-term loans in 2021 compared to 2020. If anything is indicative of just how easily influenced this generation is by online users who glamorize high-end products and services, it would be that big spike in BNPL usage alone. Ultimately, debt is becoming the rule instead of the exception.

You’ll see them grow in popularity even more, as Afterpay actually coined its own consumer holiday, much like Amazon’s Prime Day, called Afterpay Day. Affirm recently released research headlined “Americans Trust Their Ex More Than Their Credit Card Company,” a strategic press release that easily reads as self-promotion of their product to millennials and Gen Z over the archaic credit card. To further integrate themselves into culture, multiple BNPL companies themselves are taking to TikTok and other social media platforms by seemingly camouflaging among regular TikTokers and creating an idyllic vision of the BNPL scheme. 

You’re Being Trapped by Predatory Practices

You should be honest with yourself. If you’re tight on money this year, as many are thanks to worsening inflation rates, there’s no shame in having a lighter Christmas. You don’t love your parents any less if you don’t buy them an extra material good to be wrapped under the Christmas tree. In fact, I think they’d be proud of you if you chose to be smart about how you manage your money and not rack up debt.

“This Valentines Day, I’m shopping with AfterPay to help gift my mom something from Lululemon,” said TikTok influencer Monroe Capri in a collaborative video with Lululemon X AfterPay for gifting purposes. She then proceeds to try on a crewneck sweater and yoga pants and asks for her viewers’ opinions.

Afterpay, Klarna, Paypal Credit, Sezzle, Zip, Affirm, and plenty of other BNPL services pop up while you’re online gift shopping and might lure you in if you don’t want to show up on Christmas Day empty-handed. You make just a couple clicks, hand them a small down payment, and then the company decides how you’re going to pay them back. Oftentimes it’s in four payments, but different companies offer alternative payment structures.

“When I decide to make four payments of $23.47 instead of just paying $90 at once,” reads the text on @thatoneautumngirl’s TikTok video where she dances in celebration, alluding to the fact that she’s not the only one hopping on the trend with her caption “My Afterpay girlies will understand.”

I’m totally sympathetic to the styling struggle; our trends come and go at much faster rates than they did in the past, so if you want to stay en vogue, you’d think you need a new wardrobe every season. Fast fashion brands that partner with BNPL companies exploit these short-lived micro-trends or “aesthetics” and entice fashion-forward ladies to just BNPL their Princess Polly, Revolve, or other favorite brand’s carts and worry about the cost at a later time.

“Princess Polly provides a guilt free (and interest free!) shopping experience so you can receive the newest fashion now, and pay for them later while your Princess Polly order gets processed straight away,” reads the Afterpay section of retailer Princess Polly’s website.

Let’s Take a Rational Look at BNPL

First things first, your purchase is not actually cheaper. Your purchase is the same price as the original offering, but you’re just procrastinating on following through with what debt you owe the retailer. In the chance that you take out too many different BNPL transactions and can’t follow through on your payment, I don’t think your Princess Polly shopping cart is as guilt-free as they asserted it would be.

If you’re about to take out a loan for a car or a mortgage for a house, think about how much paperwork you have to do. There aren’t many quick, easy, and legal ways to get a loan fast without going through hard credit pulls and multiple proofs of authentication for your own income, your spouse's income, and any other loans you might already have out which could keep you from paying off the new one. 

Similarly, with a credit card, you have to submit an application, hope that you’ll be extended a girthy credit line, and then there may even be a waiting period to receive your card in the mail. With the BNPL scheme, getting “free” money is as quick as downloading an app and the only time you need to go through an approval period is from purchase to purchase.

I don’t know about you, but as I grow older and start to juggle more responsibilities, I start to feel a little scatterbrained. You might have some combination of the following expenses: credit card payments, car payments, phone payments, utility payments, medical bill payments, rent payments, mortgage payments. No matter your personal finance configuration, are you certain you want to add another payment responsibility into your life instead of minimizing the amount of debt you’re in and reclaiming ownership over your finances?

It’s one thing for “material girls” to lust after pretty cosmetics, luxury brand names, and quality clothing, but when you see how BNPL is pushing its way into day-to-day life, you might feel understandably concerned with the state of our consumer market. Last year, Klarna partnered with Chevron and Texaco gas stations for their self-explanatory program called “Fill up now. Pay later.” Furthermore, competing BNPL company Afterpay actually funded a poll that reveals that people want to use BNPL services to fund their car repairs, rent, and medical bills. We’re falling into a debt trap, and fast.

Your Best Practices for a Tidier Pocketbook

Don’t sweat it if you’ve used BNPL in the past or plan on using it in the future! I’m not shaming you for your choice. Your takeaway should be that BNPL is an option, but not a habit that you let people online glamorize for you and mislead you into debt. If you know that you can confidently pay off an item that’s a few hundred dollars and you just happen not to be able to use your existing credit cards, then BNPL isn’t too harmful.

Owning items, whether they are luxury items or necessary purchases, should instill within you a healthy sense of pride. You earned the money, and you made a personal decision on how you think that the time spent earning your money is valued in exchange. Ownership gives you a heightened (and deserved) sense of self-esteem, and while you shouldn’t let it turn you into a maximalist hoarder, you also shouldn’t do a 180 and be complacent with owning nothing.

Instead of allowing yourself to covet an item to the point that you’re willing to incur debt because you simply “have to have it,” you should work yourself up to a point where you know what you need in the immediate, know how to responsibly treat yourself, and have a goal to grow your household income. 

The same rule is lent to holiday gifting. A gift isn’t meaningful to its recipient based on its dollar value, a gift carries meaning because of the gesture itself. You’re thinking of someone, you’re exchanging your time, money, or a combination of both to honor that person, and if they think less of you because you’re not throwing down dollar bills, then they’re the ones who need to set their priorities straight, not you!

Closing Thoughts

At the same time that younger generations are falling prey to instantaneous, short-term loans to fund their shopping habits through “buy now, pay later” schemes, they’re also being encouraged by global leaders to be okay with owning nothing! It’s a tricky trap, since our social media feeds put pressure on us to stay on-trend, so many might rely heavily on BNPL. This method places less of a burden on your own bank account in the short term, but could push you down a materialistic rabbit hole and straight into debt. 

No matter what products your favorite influencers promote for you to buy as gifts for your loved ones or for yourself on TikTok and Instagram, reassuring you that you can just BNPL, spending outside your means is not a good habit to get into. Honesty is the best policy, so be honest with your family if you don’t expect you can gift as much this year, and be honest with yourself about how far you can comfortably extend your wallet!

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