Have you ever wondered about the ins and outs of buying on credit? There’s a growing trend on South Africa’s shopping scene, namely Buy Now, Pay Later (BNPL), set to grow 10 to 15 times its current size by 2025.
So, let’s dig deeper into how BNPL works, unravel the mystery of credit scores, learn about staggered payments, and become overall savvy shoppers.
💸Getting to Know Buy Now, Pay Later
What is BNPL? Exactly what it sounds like, it’s a convenient payment option that lets you purchase what you want now and pay for it later. It’s like a shopping buddy helping you out when your funds are a bit short.
The total purchase amount gets divided into smaller, affordable portions, which you gradually pay over a few weeks or months or until paid in full. But remember, BNPL is still buying on credit, and there are downsides you need to be aware of.
💰How Does Buy Now, Pay Later Work?
So, you’ve just spotted that must-have item, but unfortunately, it’s outside your budget. You’re worried it will sell out before you can make it your own when you suddenly come across the option to “buy now, pay later”. A shopping superhero! Now, with nothing standing in your way, you’re ready to purchase.
Hold just a moment. When you sign up for BNPL, some credit providers want to do a credit check first. After all, the lender wants to know that you can pay back what you owe. Sometimes they do a soft check (which won’t affect your credit score), but other times they do a hard check, which could leave a small mark.
Keep an Eye on Your Credit Score
If you’re working on improving your credit score – which basically is like a report score for how responsible you are with your money, influencing how much your credit provider is willing to lend you – you might want to first research whether your chosen BNPL credit provider conducts hard or soft checks.
Once you’ve been approved for BNPL, you’ll make a small upfront payment – think of it as the first payment done and dusted. The remaining amount you owe gets split into equal parts, which will be automatically deducted from your bank account or credit card until the item is paid in full.
🛒How To Use Buy Now, Pay Later Responsibly
Here are guidelines to help you understand the pros and cons of BNPL.
1. Keep Your Eye on Payments and Interest
If you pay the portion you owe before all the agreed-upon dates, you won’t need to pay late fees. However, if you miss any payments, they might add extra charges called “interest”. So, keep an eye on both your calendar and bank balance to avoid late or “bounced” payments.
2. Only Use Credible BNPL Providers
While BNPL is a helpful way to pay for items when you don’t have all the cash for it at hand, it’s vital to double-check the credibility of the store and the reliability of its credit systems. You can do this by reading customer reviews and checking the website’s security protocols.
3. Avoid Making Impulse Purchases
Keep in mind that BNPL is still a form of debt, and you’ll need to tread carefully to avoid financial pitfalls. Before making a purchase, see if you can comfortably manage the scheduled payments and avoid impulse buys. To avoid paying extra charges, you’ll need to keep your spending in check.
4. Understand The Upsides and Downsides of BNPL
With BNPL, you can immediately bring home your desired items, bypassing the waiting game. The added bonus of being able to chip away at payments bit by bit, weekly or monthly, is a definite perk. They’ll also send you reminders to pay on time. Overall, the whole process is a breeze, making transactions quick and convenient.
Still, using BNPL might make you spend more than you mean to. If you don’t pay on time, you could get hit with extra charges and no longer have access to as many choices. Dealing with returns and possible delays can also be a hassle. And remember, not all stores let you use BNPL, so check first before you count on it.
💳 Tips for Shopping Like a Pro in South Africa
Ready to make the most of BNPL? Here are some quick tips.
Understand The Terms
Make sure you know what you’re agreeing to, when to pay and what happens if payments are late.
Manage Your Budget
You should be able to comfortably handle the payments without straining your finances. There are many budgeting tools out there that can help you stay on track.
Think Before Buying
Ask yourself whether you really need something or if it’s a spur-of-the-moment decision.
Do Your Research
Check out the BNPL company, read reviews and ask friends about their experiences.
Avoid Impulse Buys
Take a peek at your budget before making a purchase through BNPL.
Happy Shopping with Hellopeter
There you have it! BNPL is a useful payment option, letting you buy what you need without breaking your wallet.
But remember, it’s still a form of borrowing, so be wise and read reviews on Hellopeter so you only use trusted stores and BNPL providers.
Happy shopping, Mzansi!