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Introduction

BNPL. Have you heard of this before? I'm slightly surprised that this wasn't in the Leoglossary for Leofinance. It actually has been around for a while now but it's starting to become popular again. Anyways BNPL is short for buy now pay later. To get a more precise definition, Investopedia defines buy now pay later as a

short term financing that allows consumers to make purchases and pay for them over time, usually with no interest
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Basically for this, you will purchase something at upfront for example at 1/3 or 1/4 and then pay another 1/3 or 1/4 every month following until you fully pay off the item. Most of these BNPL services are on mobile apps now and it seems to be targeted more towards Millennials and Gen Z.

Just as an example, Apple introduced a pay later option last year and it basically allows consumers to purchase in 1/4 installments as I mentioned before. There's no hidden fees or interest rates. You can read more about this here.

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I got the idea of writing this post after watching a Youtube video that covered about Millienials and Genz in debt and why. In this video, they talked about the rising of costs (inflation). The rising of costs in Singapore was the aftereffects of the government adding to the money supply by giving vouchers to make purchases. The video also gave some insight on how millennials are spending their money in Singapore. This video focused on Singapore but I think most of the stuff they said can be applied to almost every country around the world.

In this post, I will cover the pros and cons of BNPL and end it with some final thoughts.

Pros of BNPL

BNPL is actually not a bad thing. It helps get more sales volume for retailers and for the consumers they are able to purchase something they wouldn't normally be able to purchase. The main pro of BNPL is being able to split up the payments to something more manageable. Just think of it like this. If you want to purchase a laptop for $2000 it would be a lot to pay at once but if this was split into $500 it would be more manageable especially for Millennials and Gen Z which most are struggling financially and barely surviving.

The second benefit is not having any interest rates or extra fees. If I'm not wrong, you will only have extra fees if you miss your payments. You most likely will have to pay late fees or something like that. As you can see, it's better than taking a loan because for a loan usually you will have to pay back interest. Even credit cards will charge interest if the balance carries over.

Finally, the last critical positive point for BNPL is usually not needing a credit score check. Maybe you are someone that hasn't built up a credit score or needs to rebuild their credit score, then this would BNPL would be a good option for you. This basically makes it easy to get approved and you can start making purchases right away using this BNPL method.

Cons of BNPL

Well with pros, usually there are cons as well and BNPL is no different. With BNPL you need to be really careful and manage your payments. Usually these payments will be made straight from your bank account so you could get overdrafted if you didn't have sufficient funds in your bank account.

This brings up the issue of overextending finances which was also mentioned in the Youtube video. Those that were using BNPL, there was a fair amount of people that were unable to make payments because they bought too many things and it may seem like small amounts but they add up all together. In a way, the pro mentioned above could also end up backfiring and make it a con.

This is a small con but could be big for those that care. If I'm not wrong, you will miss out on any credit card rewards or cashback if you are using BNPL. I don't think this is a big issue because if you really need those credit cards rewards you could use your credit card instead.

Lastly, it's another benefit that backfires which is the credit score mentioned previously. Although they don't usually check your credit score, you also can't improve your credit score when using BNPL. Another thing to note is that it could bring down your credit score for missing or late payments.

Concluding Thoughts

This is actually something new I learned more about after I watched that Youtube video. I was kind of aware of the concept but I wasn't aware of how popular it is now. I find it amazing how we are able to learn new things from YouTube videos of course watching stuff that is informative and educational and not just purely for entertainment.

Knowing myself, BNPL is not suitable for me. I don't like to have that feeling that I still owe money so I would prefer to minimize this as much as possible. I don't like how they are targeting Millennials and Genz with this idea of BNPL. If you watched the video, those BNPL services would advertise saying that "you deserve to treat yourself and also enjoy life". It's a big trap and marketing is just really strong when using the right words; it gets people to act which in this case is using their BNPL service.

Although I personally wouldn't use this, I still think it's a great concept if used responsibly by responsible people. There's nothing wrong with this form of paying. There are people that need this type of payment and it's super helpful especially for people that are lacking money and have a low credit score, being able to split the payments would be more ideal. What do you think of BNPL? Leave down your thoughts in the comments below.

Thank You

Anyways that's all from me! Thank you for taking your time to read and I hope you were able to learn something new.

Credits

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