You’re shopping online, and at checkout you see another way to pay. Instead of paying the full price today, you can split your purchase into a few smaller payments over time. If you’re among those of us born in the 1900s, a distinctive voice from TV commercials chimes in, promising the latest gadget for “just four easy payments of $19.95.”

Today, this is called a buy now, pay later (BNPL) plan, and it may come with a few strings attached. Let’s talk about what these plans are and how to use them responsibly.

How does buy now, pay later (BNPL) work?

BNPL lets you buy an item today with a down payment, then pay off the full purchase over time through smaller payments, with the potential addition of interest and fees.

While breaking a purchase into smaller payments may make it seem more affordable, it’s still a form of borrowing. Before you choose BNPL at checkout, review the full terms before you agree. Some plans may charge interest or fees, particularly for longer repayment schedules, with added repercussions for late payments.

What are the risks of BNPL?

Convenience can lead to overspending and more impulse shopping.

BNPL plans sell you on the impulse buy. “Hey, it’s only a small payment. You can manage that!” This makes it easier to ignore the total amount you’re spending. For example, breaking a $100 purchase into four $25 payments can make the purchase feel less significant. But you’re still spending $100, plus any additional fees and interest that could quickly snowball.

Our tip? Wait a few days after adding something to your cart before deciding to buy it. Who knows, after the dopamine hit of adding it to your cart wears off, you might decide you don’t need it.

Relying on BNPL frequently can strain your budget.

One BNPL purchase may fit comfortably into your budget. The bigger risk comes when several purchases begin overlapping. Imagine you use BNPL for a new outfit. Then concert tickets. Then a birthday gift. Each payment may seem small, but before long, you might be stuck with more than you can comfortably manage.

Like other forms of borrowing, missed payments have consequences. Depending on the provider, you could face late fees, restrictions on future purchases, debt collection or negative impacts to your credit.

If you choose to use BNPL, treat those installments like any other financial obligation. Know what you owe, track when payments are due and consider the total cost before you buy.

Keep the big picture in mind

Buy now, pay later isn’t automatically good or bad. What matters is whether the purchase and repayment plan make sense for your budget and fit your financial goals.

Before agreeing to a BNPL plan, ask yourself:

• Would I buy this if I had to pay the full price today? Smaller installments can make an expensive purchase feel cheaper than it really is.
• How many debt payments do I already have? Look at all your existing bills together, not just the new one.
• Are there interest charges or fees? Read the terms so you understand the total cost and risks.
• Can I make this a savings goal instead? If the purchase can wait, set aside money from each paycheck to save up instead of taking on debt now. Consider using a Club Account to keep your savings goal money separate in your budget.

A little planning now can help keep a convenient checkout option from becoming an inconvenient pile of payments later.

Need help updating your budget? Try our budget calculator.

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