Strategies to make buy now, pay later services more effective for you

Those TV commericials promising “three easy payments of $19.99” were quite ahead of their time. Although calling a toll-free number to buy as-seen-on-TV items is no longer in style, the idea of paying in instalments remains popular thanks to a booming marketplace of buy now, pay later services.

With global companies such as Affirm and Klarna and local BNPL players including Tabby and Spotii, there are now a variety of ways to divide up the cost of large purchases.

However, there are rules and limitations – some BNPL services partner with specific merchants, while credit card companies require you to carry one of their cards to participate.

But limitations have not stopped it from becoming a trend. In June 2021, Competiscan, a company that tracks and analyses direct marketing activity, noted a 530 per cent increase in BNPL email marketing campaigns in the past year, with 28 per cent of retail emails mentioning BNPL in the first quarter of 2021.

BNPL is still a form of debt. If you are debt-averse and would rather save up for major purchases and pay for them in full, that is an excellent tactic.

But debt is not inherently evil. It is merely a financial tool that can make major purchases more manageable. As with any financial tool, it is all about how you wield it. Here are some ways to use BNPL thoughtfully.

Andrew Gold, a financial adviser at Prestige Wealth Management in Texas, has used BNPL services to finance large purchases, including travel bookings, business purchases and a new mattress.

As someone who frequently discusses spending with clients, he recommends considering BNPL when you can afford to pay for something in full, but paying in instalments would help you better manage your cash flow.

“This is not for somebody that is complaining about never having money, or is always borrowing money from people,” Mr Gold says. “This is for people who have consistent income, who are looking for ways to take advantage of some of the benefits and the convenience of breaking up a purchase over a few weeks.”

Yes, you can spring for the nice shampoo and split the purchase into four $6 payments, but just because you can, does not mean you should. BNPL services are helpful but they also make it far too easy to impulse shop.

“We are in a world of instant gratification,” Mr Gold says. “There is a tonne of overindulgence and excess in everybody’s life.”

Before you make a major purchase, find out how you can secure a refund if you return the item or the product is lost during shipping or arrives damaged. If the merchant allows for refunds, you can get your money back. Affirm, Klarna and Afterpay will pay you back in full, although Affirm notes that if your plan includes interest payments, you will not get that money back.

Should you need to dispute a charge because the item is missing or damaged, your first step is to contact the merchant directly. In some cases, if the merchant grants you a store credit instead of a refund, you must still make payments .

Stay organised by using BNPL for specific purposes, such as a series of purchases for one event. Alexandria Broward used BNPL when she and her now-husband decided they wanted to be married within a month’s time.

With only three weekends to find a dress and sort out other logistics, Ms Broward put some expenses on credit cards and used BNPL for her outfit. She ordered several dresses and fronted a fraction of the cost, returning all but one and receiving money back.

Her tactic was to avoid putting the whole cost on credit cards. She also used BNPL to divide the cost of her $400 wedding shoes. “They really tied the dress together,” she says. “If I ever have a daughter, she will get those.”

If you need to dispute a charge because the item is missing or damaged, your first step is to contact the merchant