Americans seem to be increasing their use of buy now, pay later (BNPL) financing and some are coming to regret it. There is nothing new about buying something and paying for it later. BNPL is just another, more modern iteration, with the new part the ease of access and the lack of regulation, compared to standard credit cards. When non-essential stores were closed and many of us were confined to our homes, buying online became increasingly essential, attractive and sometimes addictive.
There is nothing inherently wrong with BNPL plans. However, consumers can be a little sloppy about keeping track of a bunch of different payment plans and can be surprised by the size of their total monthly obligations. In addition, many of these plans are not the same, with varying terms and conditions, leading to the potential for unexpected fees and other costs.
Investors and individuals should be careful in adding debt, be aware of the terms, and make sure that the aggregate of all obligations has been realistically budgeted.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA