How Helpful or Unhelpful are “Buy Now, Pay Later” Apps?

Five years ago, if I told you that you could buy your clothes on credit, you’d probably think I’m joking.

Surprisingly, with a new category of fintech apps, this has become a reality.

“Buy now, pay later” or BNPL apps have completely revolutionized the way consumers pick up credit. Simply put, these apps are payment mechanisms through which you can make online purchases and pay for them later.

To utilize this, you have to make sure that the seller accepts the app as a payment method.

If yes, then you have to, first, download the BNPL app on your phone and fill in some basic details to register. Following this, the next time you make an online purchase, you can opt to pay via the app.

Just like any other lender, these apps have payment cycles under which you have to pay back the credit you’ve taken. If not, you’ll be subjected to fines and penalties.

Whether you use these apps or not, there is no denying that they are quite helpful for the savvy shoppers of today.

Also Read: 10 Best Money Saving Apps in 2019

Following are some of the advantages of such apps –

Quick Purchases

The best part about using these apps is the increased speed of our purchases.

Since we are completely skipping the payment stage, our purchases can be made in an easier manner.

These apps also help us organize our purchases. How? We can make all our purchases at once, and then choose a suitable date on which we can pay them all off together.

Doing this can help us build a system of organized monthly or weekly purchases as per our needs – buy whatever you need for now, and when you have the money, pay it all off timely to avoid penalties.

Multipurpose Credit

Since these apps are becoming increasingly popular overtime, more and more retailers have tied up with them to attract more customers.

Therefore, we can now make credit purchases for almost any online transactions – from ordering food to booking airline tickets and purchasing home appliances online.

Useful during an Emergency

Many times, we are faced with emergencies which require a lot of cash at one go, like unforeseen hospital expenses.

Some of us might not have the cash that we need to cover these costs, and getting a loan from the bank might delay the entire process.

At times like these, the BNPL apps are a boon for us. With minimal registration requirements, you can acquire the money that you need immediately and hassle-free.

Though these advantages are great, there are some unique problems associated with using these apps as well.

Also Read: Top 3 Apps for Safe Money Transfers

Here are disadvantages which can make the app seem unhelpful to some of us –

Smaller Payment Cycles

While credit card and loan installments have monthly payment cycles, these apps have smaller cycles.

Some apps have a 15-day cycle, whereas others have one or more deadlines before which you have to make payments.

This schedule is stricter than that of a credit card. Even though it is very easy to make purchases here, you’ll have to be mindful of such strict deadlines before you decide to use this facility.

Stringent Penalties

Apart from these strict payment schedules, there are multiple penalties if you don’t make payments on time.

These penalties vary from daily fines to the complete blacklisting of a user from the app.

Living Paycheck to Paycheck

The biggest disadvantage of using these apps is the change they can bring to our financial behavior.

Since these apps make the process of getting credit easier and quicker, some of us might build a habit of making more purchases than we can afford and then keep paying them off on a regular basis.

This can create a problem for the people who usually have a hard time maintaining a record of their finances in general.

Using BNPL apps might bring about the habits of making impulse purchases without any financial planning or research.

Now, we come back full-circle – are BNPL apps helpful or not?

The answer to this question depends on each person’s financial habits.

If you are comfortable with keeping a continuous track of where your money is going, then you can definitely use these apps. If not, then using these apps might contribute to an unhealthy habit of taking unnecessary debt.

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About Vineet Patawari

Vineet Patawari is the CoFounder of stock analytic app StockEdge and financial market learning portal Elearnmarkets.com. He is a Chartered Accountant and IIM Indore Alumnus.
View all posts by Vineet Patawari →

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