Buy Now Pay Later: What You Should Know
Protecting You: Buy Now Pay Later
© 2022 Dan the Budget Man
(Please note: This blog is not intended to be all-inclusive, rather, it serves to let you know some fundamentals we feel are important for you to know. Information that will help you make good money decisions now and in the future!)
What You Should Know: Terms of payment, fees & other charges, missed payments, including easy debt calculations you can make. Bonus: Free Debt Relief Workshop.
To protect your family (and your money) every person needs to know about Buy Now Pay Later plans. This plan is not new. It started off years ago as the Layaway Plan.
You may say, “But, if I watch my spending, none of this applies to me, does it?”
Yes, it does!
Whether you find yourself in a position to try the BNPL plan, or you are a small business who intends to include this plan into your payment options, it is imperative that you learn a few things that may protect you and your customers.
Let’s Look Back:
Almost 100 years ago – in the 1930s – the term layaway entered the vocabulary of millions of people. Why? Times were financially tough for people. It was the great depression.
- Stock market crashed in 1929.
- Great economic depression from 1929 until 1941 (some will argue 1939).
- World War II September 1939 – September 1945.
- Roughly 25% of work force was unemployed. Your great grandfather may have slept in the park, or protected himself from the elements by sleeping in a sewer pipe, wrapping himself up in newspapers or whatever he could find to keep warm at night.
- Frugality was the rule of the day. Families were social by holding get-togethers, playing board games (Monopoly-1933, Scrabble-1933), or they occupied themselves with gardening, canning, and things of this nature. It was not at all uncommon to use cardboard or cotton to sustain the soles of the families’ shoes.
- No working = no spending. It was not until June of 1933 that president Franklin Roosevelt signed the banking act, establishing the FDIC. Federal deposits were insured up to $2,500 in January of 1934.
- Unemployment check? Unemployment insurance with a maximum 10-weeks of coverage passed in 1935.
Cheer up! Layaway is here.
What’s layaway, anyway?
The simple answer is that layaway is a purchase agreement where the buyer agrees to pay full price for an item over a certain time period. Once payment in full has been made, buyer can pick up the item and take it home. Works like this:
A. Go to the store and pick out, say, a washing machine (provided the item has been approved for layaway purchase by the retailer).
B. As a customer, you pay money down as agreed upon per the layaway contract.
C. Your washing machine stays at the store until you pay for it in full.
D. As a buyer, you make weekly, biweekly, or monthly payments toward your purchase as dictated in the layaway contract.
E. Once you balance reaches zero, you pick up your item and bring it home to enjoy!
By reading the contract, you get answers to questions about:
1. Layaway fees, if any are imposed.
2. What items qualify for layaway.
3. Is the down payment a set amount or can I pay what I can afford?
4. If I miss a payment, must I forfeit the item?
5. If I forfeit an item, how much money do I get back?
6. Is there a restocking fee imposed?
Layaway is easy:
What is included?
- 1. Customers of layaway plans paid no interest. Depending upon the plan, some retailers charged a flat, minimal fee to cover storage costs.
- 2. Few qualification hurdles, unlike charge cards and loans.
- 3. Pay it on time - or lose it! Scheduled payments had to be made on time or else. Those who failed the test ran the risk of losing their item(s), the accumulated money paid in, or returned funds were hit with a cancellation fee. (Not fun!)
Bring on the Good Times!
* When employment resumed, so did the good times.
* Couples were having babies, buying homes, and filling their houses with consumer goods like toasters, pots and pans, rugs, vacuum cleaners, refrigerators, freezers, washing machines, and whatever they desired.
* Then came the cars and family vacations.
Know this when you shop:
- Looking often leads to desire
- Uncontrolled desire leads to manifestation
- A motivated seller will find a way for you to purchase
ENERGIZER: Stop looking if you:
- Do not want the item
- Should not have the item (or at least not right now)
- Cannot afford the item
Fast Forward to Buy Now Pay Later
If you have watched Field of Dreams, you will recall Kevin Costner wandering in a corn field and hearing a soft voice repeating, “If you build it, he will come.”
Look at how “buy now pay later” is being advertised today. You get to choose how you want to check out. You are being offered multiple payment options earlier in your online shopping trip, meant to prevent cart abandonment.
You are offered easy alternatives to pay for items that you cannot currently afford to purchase. Today, you can purchase most anything you want without batting an eyelash.
Another hook, is that you do not have to leave your merchandise at the store until it is fully paid. Advantage or disadvantage? (What do you think?)
This retailing program was built a long time ago, the question remains: Will you come?
Some Words to The Wise:
1. Before you log on and buy, read your purchase agreement contract carefully.
a. Pay close attention to “terms of payment”
b. What happens if you miss a payment? Get this in writing.
c. Are there hidden fees or other charges that you will incur over time?
d. Knowing the finely printed details up-front will save you misery later.
2. Keep a handwritten log where you manually must update your buy now pay later purchases.
3. Speaking of handwritten logs, make a list of every debt you currently owe. In one column, list the monthly amounts you owe (include every credit card balance, car and other loan payments, student loans if you have them). In the second column, list the amount due in its entirety. Update this regularly.
What happens next is up to you. You can continue your current course of spending money, or you can choose to protect yourself from overly aggressive spending habits by using buy now pay later plans only when you must.
Answer these questions:
1. Do you currently take home enough money each month to cover these amounts?
2. If you did not spend another dollar on anything but the absolute necessities - like food, gas-insurance-bus fare, rent-or mortgage payment, etc., how long would it take for you to pay off every dollar you currently owe?
3.Would it be worth your while to come up with a plan for your money whereby you could pay some of these expenses off earlier?
4. Hidden fees INCREASE the price of your purchase.
By focusing on the items we have discussed and others, you actually put yourself in a protected position when it comes to spending and shopping with Buy Now Pay Later Programs.
Each program will likely be a little different from the others. You may want to create a list of questions for each program you use.
In time to come, you'll be glad that you have given yourself the gift of knowledge when it comes to Buy Now Pay Later Programs!
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