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Buy now, pay later (BNPL) services can make it easy to split a purchase into several even payments without any additional fees or interest. Although individual BNPL services often limit how much you can borrow at a time, you might be able to take out BNPLs from different providers. But if you don't keep track of how much money you're borrowing, you could find yourself deep in debt and struggling to manage all your bills.
Here are five steps you can take to avoid this potentially costly mistake and take control of your money.
1. Get Organized
Depending on which services you use, you might have a mix of interest-bearing plans with monthly payments and interest-free plans with biweekly payments. And because each of your BNPL plans can have its own payment timeline, the due dates could be spread throughout the month.
If you want to manage multiple BNPLs, first try to get a clear picture of how much you owe and when your payments are due. You can sign into each of your accounts to check your current balance and payment schedules. However, you might need to use a spreadsheet or budgeting app to organize all the information in one place.
2. Review Your Finances
Once you've got a sense of how much you owe in BNPL payments, review the payments within the context of your other finances—how much you earn and your other bills. This might be a good time to set up a budget if you don't have one. At the very least, make a list of all your bills and their due dates over the next two months because many BNPL plans last six weeks.
The timing of your BNPL payments could make budgeting tricky because most people budget monthly. However, your overview can help you determine if you easily have enough money to afford all the payments, if the timing might be tight or if you definitely need to find some extra wiggle room.
3. Make Payments and Track Your Balances
This is the point where you're going to make all the payments on your BNPL accounts, watching them dwindle over time. You have two options here: Set up autopay so you don't have to remember to make a payment, or enable account notifications and pay manually.
Set up Autopay if You Can Easily Afford the Payments
If you know you can easily manage your BNPL payments along with your other expenses, you could set up autopay for all your plans. Autopay may even be set up by default in some cases.
With enough of a cash buffer, you won't have to worry about when the payments will hit your account, they'll automatically be debited from your available funds. You may still want to set up alerts and double check your payment account to be certain you won't accidentally overdraw an account or wind up with high-interest credit card debt.
Also, review the BNPL provider's terms and conditions before setting up your automatic payments. Some companies may charge an additional fee depending on your payment method.
Or, Set Up Notifications and Closely Monitor Your Accounts
If you're cutting it close or are anxious about affording all your bills, regularly monitor your bank account, BNPLs and other bills. Notifications can help you keep track of your BNPLs' due dates, but you might want to turn off automatic payments to avoid overdrafts.
Ideally, you can thread the needle, pay all your bills and get back on track once you've paid off several BNPLs. But you may also have several options when you can't afford a BNPL payment.
Many providers let you reschedule or extend the payment due date for free, which could give you another two weeks to come up with the money. You might only be able to do this once per plan or have to pay a fee for additional extensions.
You also might be able to miss a due date without paying any late fees. But be careful: The past-due amount might be added to your next payment, and missing payments could affect your ability to use the BNPL service in the future. If you don't repay the full amount quickly, your account could also be sent to collections, which could hurt your credit.
4. Try to Pay Off BNPLs Early
For those with the financial means, paying off some of your BNPLs early might be the best way to reset and then reassess your finances. If you have interest-bearing BNPLs, you may want to focus on those first to save money. Or, try to pay off all your plans with one provider to limit how many accounts you're using at once.
5. Use BNPLs Sparingly to Avoid Overwhelm
Using BNPLs for larger one-time purchases rather than everyday expenses could make managing your BNPLs—and other expenses—easier going forward. You may also want to limit yourself to only using one BNPL service. It will be easier to manage your plans if you only have one account to check. Plus, repeatedly repaying BNPLs with the same service might help you qualify for higher limits from that company.
Alternatives to BNPL
Many BNPL users also use other types of credit, such as personal loans or credit cards. Although BNPLs can be attractive, especially if you have poor credit or want a fixed repayment schedule, some of the alternatives can also be good fits.
- Cash and debit cards: Getting an interest-free loan with a BNPL seems like a win-win, but only if you can afford the purchase and don't get overwhelmed. Sometimes, it might make more sense to stick with the money you already have and use cash or your debit card.
- Credit cards for everyday purchases: A BNPL might be better than a credit card if you're carrying a credit card balance and will have to pay high interest rates on new purchases. However, you don't accrue interest on your purchases if you pay your credit card bill in full each month—and you might earn lots of rewards.
- Credit card pay over time plans: Some credit cards have options that let you pay for certain purchases with fixed payment plans. These are similar to using a credit card with a BNPL, but review the eligibility, terms, interest and fees to see how they compare.
- Credit cards with interest offers: You could also look into an intro 0% APR credit card to finance a large purchase without accruing interest during the promotional period. You might have many months—sometimes well over a year—to pay off the balance. Any remaining balance will start to accrue interest at your card's standard rate after the promotional period ends.
- Deferred interest credit plans: Stores may also offer to finance your purchase or give you a credit card with 0% interest during an initial promotional period. With deferred interest, if you don't pay off the entire balance before the end of the promotional period, all the interest will be retroactively added to your balance.
- Layaway: Some stores also offer layaway plans, which also let you pay for products over time. This may be an undesirable alternative to BNPLs as there could be service fees, and you'll have to wait until you make all the payments to receive the product.
Compare Your Credit Offers
Your credit history could be important if you're trying to simplify your finances and considering different options. Check your credit for free with Experian, and regularly review your credit report and score to know where you're at. If you're considering opening a new credit card or loan, you can also use Experian CreditMatch™ to get personalized offers based on your unique credit profile.