3 Payment Methods Better Than Buy Now Pay Later

With millions of shoppers using it, Buy Now Pay Later (BNPL) has become the hottest retail payment option available. BNPL has evolved into a $100 billion industry on the perception that it is a better alternative to credit. To this end, it was responsible for 2.1% ($97 million) of total eCommerce sales in 2020. 

However, if you are doing your best to control your finances, BNPL may not be the best way for you to pay for your items.

What Is Buy Now Pay Later?

Also known as point of sale loans, Buy Now Pay Later is primarily available online as a means for shoppers to break down the cost of purchases into incremental installments with a payback range of two to six weeks. Unlike credit card purchases, BNPL buyers avoid hard credit checks or interest charges. On the selling end, merchants share a cut of each transaction with the provider in exchange for potential higher-order averages and high conversion rates.

You might have seen the BNPL checkout button on many retail websites. Big-time online retailers like Apple, Amazon, Walmart, and Target are offering the service through providers like Square, Afterpay, and Affirm. Also, BNPL is especially popular with Gen Z and millennial shoppers.

Why Shouldn't You Use Buy Now Pay Later?

Some people may mistakenly associate BNPL with the old fashion layaway plan. But the only similarity is both allow you to make interest-free payments until you pay for the product in full. The significant difference between the two is the layaway system only allows you to take possession of your merchandise after you pay off the entire balance within the plan period. Plus, there are no penalty payments involved as long as you pay off the balance in full within the layaway plan period.

Most BNPL plans are more like controversial payday loans because they offer four to six weeks short-term loan schedules. Although most BNPL providers don't charge high-interest rates like payday loan plans, Buy Now Pay Later comes with some serious risks that you should consider.

• Since you only make a small down payment at purchase, you stand the risk of getting into an overspending pattern. It's very similar to the credit card trap.
• You could get stuck paying high late payment fees if you fail to keep up.
• Even though they may not check your credit outright, your credit score could fall if you don't keep up with your payments.
• Although some BNPLs spell out their customer protection policies, some providers have nebulous guides for returns and transaction disputes.

Buy Now Pay Later is a credit card with similar follies. Also, the four to six-week payment schedule is a tightrope situation with a high potential for oversight and late payments. You have to ask yourself whether the risks of damaging your credit or sinking into debt are worth the convenience of buying an item that is too expensive for you at the moment.

For your financial wellbeing, it is best to avoid money traps from buy now pay later companies and save up for those more expensive items. Your financial future will be much brighter if you get in the habit of only spending the money that you actually have.

Alternatives to Buy Now Pay Later

With proper money management and planning, you can buy what you want without putting yourself in financial jeopardy. Here are some smart and effective alternatives to buy now pay later.

1. Debit

Since BNPL allows shoppers with marginal credit to stretch out their purchase payments over several weeks, it is stealing significant market share from the debit card industry. However, given their credit history, the tighter BNPL payment schedules put marginal credit customers at greater risk of getting late fees for falling behind on payments.

Debit cards can serve as your personal financial trainer. Since you can only spend within your account balance, you tend to make better buying decisions while alleviating the risk of going over your limit. Plus, with debit card use, you can:

• Avoid service charges, fees, and interest
• Keep a more manageable budget
• Benefit from consumer protections, in most cases
• And even get cashback rewards with cards like Monorail’s

2. Cash

Unlike BNPL and other forms of payment, cash gives you a visual reference of the amount of money you hand over to purchase goods and services. Paying in cash is psychologically harder than swiping a card because you see the immediate impact on your wallet.

If you need to spend more than the amount in your wallet, you'd need to find the nearest ATM and withdraw more money. This can make you acutely aware of your spending activities, helping you to avoid overspending. Not to mention, paying in cash protects you from identity thieves, compromised personal information, junk mail, and fraud.

3. Monorail Wishlist App

Instead of encouraging impulse buying like BNPL, the Monorail Wishlist App helps you shop for the things you want by providing one place to put all the items you want. In addition, you can set up recurring fund transfers to your wishlist automatically to save up for your items. So, when you see the green light next to your wishlist item, you can purchase it through the app without guilt, risk, or debt. 

These Buy Now Pay Later Alternatives Give You the Power

As you can see, BNPL loans can lead you down a financial rabbit hole full of mounting debt, credit trouble, and costly penalties. Paying with a debit card or cash can help you avoid pitfalls associated with BNPL. 

However, the Monorail Wishlist app gives you the advantages of cash and debit cards, and it can automatically manage your shopping budget. 

See how the Monorail app can help you shop for the stuff you want.

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