Buy Now, Pay Later: How to Make it Work for You without Breaking the Bank

Walker Cole has been working part-time or earning a part-time wage for the last 10 years. For them, buy now pay later was a no-brainer. In this article, Walker discusses why buy now pay later accounts are neither the best or the worst thing to happen to your bank account. Rather, buy now pay later requires responsible consumption.

It's hard to fathom that Buy Now Pay Later providers have been around for 10 years. Because for some customers they are still 'new' and require de-mystifying. Australian startup Afterpay began as Innovative Payments in 2014, and quickly became the industry leaders, becoming global through acquisitions around the world. Alongside companies like Klarna in Sweden and Affirm in the United States, buy now pay later have made it easier than ever to split purchases into smaller, manageable payments. There are now banks that offer services in pay-in-4, online payment service Paypal, and numerous buy now pay later providers available.

Although embedded in the financial landscape, these services are polarising for many Australians. A lot of people I spoke to about buy now pay later providers said they wouldn't use such services, simply indicating they were 'bad' or that they didn't trust themselves. While buy now pay later can be a great financial tool when used wisely, if mismanaged, these providers have the potential to cause financial strain. Here’s how you can take advantage of BNPL services without falling into debt traps.

What Is Buy Now, Pay Later (BNPL)?

BNPL offers unsecured credit or micro-loans, allowing shoppers to purchase items immediately while spreading payments over weeks or months, often without interest—at least initially. These services are widely available online and increasingly in brick-and-mortar stores, making them a convenient option for both essential and discretionary spending.

Why Is BNPL So Popular?

Some of the benefits include:

1. Ease of Use: Simple approval processes with no hard credit checks.

2. Low or No Interest: Many providers offer interest-free plans if payments are made on time.

3. Flexibility: Consumers can make purchases without upfront financial strain.

Despite the benefits of BNPL, it’s crucial to navigate these platforms with care to avoid overspending or hidden fees.

These are formally some of the reasons consumers like to use buy now pay later. In informal interviews with BNPL users, the reasons they gave were varied, including they did not like to give their credit card details over the internet, to balancing their budget.

How to Use BNPL Responsibly

Only Buy What You Can Afford

The biggest mistake consumers make is using BNPL to justify purchases they wouldn’t normally afford. Ask yourself: 'Could I pay for this in full if I had to?' If the answer is no, consider postponing and saving up for the purchase.

Set Payment Reminders

Missing a payment often leads to late fees or even interest charges. Stay on top of your BNPL commitments by setting reminders or automatic payments to avoid unnecessary penalties. Or jump onto Etsy to purchase our BNPL debt-tracker spreadsheet (coming soon!)

Don't Use BNPL for Impulse Buys

BNPL can be helpful for planned purchases, such as school supplies, household essentials, or a big-ticket item you’ve budgeted for. Avoid using it for spontaneous splurges, as small payments can quickly add up. This recommendation could also be worded: learn to shop less impulsively. Being mindful of your shopping and what really brings you joy will assist with creating long-term happiness. The excitement of shopping becomes short-lived when you take a look at your outgoings.

Keep Track of All Your BNPL Commitments

With multiple platforms offering BNPL, it’s easy to lose track of how many payment plans you’ve set up. Maintain a list of your commitments, including due dates, to ensure you’re not overcommitting with the Lone Shark pay-in-4 debt tracker spreadsheet, available here or free when you sign up to receive emails on our home page.

Understand the Fine Print

Not all BNPL plans are interest-free. Some charge monthly fees, deferred interest or late fees if payments aren’t made on time. Always read the terms and conditions carefully before agreeing to a plan.