To ‘Buy Now and Pay Later’ or not?

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What’s the hottest craze in retail right now? For buzz, Buy Now Pay Later (BNPL) services must rate near the top of the tree. BNPL services provide instant gratification by allowing you to purchase and take away what you want now without having to pay for it in full. Sound too good to be true? If you’re going to use BNPL, it pays to be aware of how they work so you can make an informed choice about whether they may help or hinder your financial security.

What is BNPL?

As the name implies, BNPL means you can buy a product and take it away but pay the full amount later. Sometimes, you may be asked to pay the first instalment immediately, with the remaining cost then split up across a few weeks or months, depending on the arrangements with the provider.

Let’s take buying a pair of boots as an example. The boots are on sale for $100 but you don’t have the money to pay in full today. If the store has a BNPL service, then you may be able to use this to get the boots immediately and then make direct debit repayments on the purchase over the following weeks. For example, the BNPL service provider may let you pay 4 instalments of $25 every 2 weeks, totalling $100 across eight weeks.

Don’t be lulled into thinking that BNPL is free money though. There are still application processes and criteria to be met, and, while many providers don’t charge you interest, there may be fees if you don’t meet your repayment requirements and impacts to your credit rating.

To get a more complete guide on BNPL, read the Ruby Connection article that explores the catches, pros and cons of using BNPL services.

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.


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