15 Types of People Who Should Never Use “Buy Now, Pay Later”

From big spenders to budgeting buffs, learn which types should avoid this payment trend.

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Updated June 6, 2024
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Companies like Klarna, Affirm, AfterPay, and others offer consumers a way to split up large purchases into interest-free payments over a few months (usually four).

This might sound great for cash-strapped, inflation-weary buyers during the holidays, but for many folks, buy now, pay later loans (BNPL) can do more harm than good. 

If any of the following describe you, you’re probably better off sticking to credit, debit, or good old cash to avoid wasting money later.

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People who can get 0% APR from a credit card

Courtney Haas/peopleimages.com/Adobe woman on couch with laptop

Using one of the top 0% intro APR credit cards may be a better option if you have good enough credit to qualify. 

Many cards hold that 0% rate for 12 to 21 months, allowing you much more time to pay for your purchase without interest.

People already drowning in debt

Wayhome Studio/Adobe woman reviewing utility bills while using laptop and calculator at table

If you already have more debt than you’re comfortable with, BNPL isn’t doing you any favors. No matter how companies frame this new financial product, it’s still a loan.

By using BNPL to fund your purchases, you’re still adding more debt to the pile. And just like with other loans, late BNPL payments will incur fees, and the balance can be sent to collections. 

People prone to overshopping

ANR Production/Adobe woman with shopping packages

For shopaholics, the lower payments can feel like a license to spend more than they otherwise would. 

Using BNPL can be financially dangerous if you’re already prone to overspending. If you know this is you, avoid the BNPL option.

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People who know they can’t afford the sticker price

NDABCREATIVITY/Adobe couple in consumer electronics store

When the total price is more than you can comfortably afford, BNPL doesn’t reduce it. It just chops it up into smaller pieces — pieces you have to take from your budget for a few months after the purchase. 

Check your budget before you click the “pay later” button to see if you can truly afford it.

People who use credit cards responsibly

StratfordProductions/Adobe Couple shopping online

Credit cards already have a built-in grace period. If you’re already paying off your credit card each month, you likely don’t need a BNPL loan.

For instance, if my statement date is on March 31 and I make a purchase on March 15, I have over two weeks until I get my statement and usually 30 days to pay the outstanding balance on the card without any late fees or interest. 

People who already have the cash

Syda Productions/Adobe paying money at store cash register

When you have the money sitting in your account, just pay for the purchase in full. There’s no sense in waiting as you’ll risk forgetting to make a payment or paying late and incurring fees. Just fork over the cash and be done with it.

People with poor credit scores

JoshuAA/peopleimages.com/Adobe stressed woman on laptop

Most BNPL loans do a soft credit check to approve you, so getting one probably won't hurt your credit in and of itself. However, if you make late payments or the balance goes to collections, the credit bureaus will likely hear about it.

People with too many accounts

Sheremetio/Adobe woman counting on a calculator

Sometimes, we overcomplicate our finances with too many accounts. Keeping track of them all can be a daunting task and lead to forgetful mistakes.

If this describes your financial setup, using BNPL will add one more account or bill to pay and complicate matters further.

People who want credit card rewards

(JLco) Julia Amaral/Adobe woman in a coffee shop

Unlike most credit cards, one downside to using BNPL is that there is no cashback or rewards system on your purchases. 

If you’re stockpiling points for a vacation or saving cash back for a gift card, BNPL won’t help you reach those goals.

That said, you can pay most BNPL installments with a credit card, but this adds an additional step to paying for your purchase.

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People who want to avoid fees

Reezky/Adobe woman showing refusal sign

Most pay-in-four-month plans don’t charge interest or fees if you pay the balance on time. However, you may incur late or overdraft fees on a BNPL loan if you’re not careful making your payments on time.

People who don't watch their bank accounts for overdrafts

Vitalii Vodolazskyi/Adobe overdraft sign and documents

Automatic payments are a double-edged sword. They make sure you don’t pay your bills late, but they don’t monitor your account to ensure there’s money in it before the payment is debited. 

People who tend to run low on funds in their bank accounts should think twice before setting up automatic BNPL payments, which could result in overdraft or insufficient funds fees.

People who prefer an easy return process

fizkes/Adobe middle aged woman unboxing box

The way BNPL companies make money is that the merchant charges them a discounted price, but they charge the customer the full price and pocket the difference. 

This can make returns tricky since, technically, the BNPL company sold the goods, not the original vendor. Moreover, the return timeline may not coordinate with the loan term.

People with unpredictable income

Pormezz/Adobe office worker receiving salary from boss

Any installment loan depends on your future ability to repay it. When your income varies significantly from month to month, you want to keep your fixed expenses (like installment loan payments) as low as possible so you aren’t overextended during lean times.

People trying to build a better credit score

bnenin/Adobe making sure she has positive credit score

BNPL companies are spotty about whether they report to credit bureaus and which loans are reported. So, if you’re trying to use a BNPL loan to improve your credit score, you may be disappointed. 

While all three credit bureaus are planning to report these loans on credit reports in the future, they aren’t doing so currently.

People already living paycheck to paycheck

Wayhome Studio/Adobe family having debt problems

If you’re already squeezing every dime out of your paycheck, BNPL will only make your checks thinner. Having to come up with money to pay your installment every month is not a good way to lower your financial stress

Bottom line

rh2010/Adobe two happy girlfriends looking on the shopwindow

As with credit cards and payday loans, it's important to be careful when using buy now, pay later loans. There can be potential risks if you don't use them wisely based on your financial situation.

In most instances, the purchase amount is less than $300. If you can afford a $75 per month payment for four months, it shouldn’t take long to build up your savings to make the same purchase without a BNPL loan.

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Author Details

Jenni Sisson

Jenni Sisson is a freelance writer and editor who focuses on personal finance, real estate, and entrepreneurship. She has been published in Business Insider and The Ways to Wealth. In addition to writing, Jenni hosts the Mama's Money Map podcast to help fellow stay-at-home moms on their journey to financial freedom.