Should I Pay With PayPal in Buy Now Pay Later?
With the boom in Buy Now Pay Later (BNPL) retail financing, the preference for interest-free installments has prompted popular payment apps like PayPal to launch their own versions. If you are a regular PayPal user and are not familiar with this form of payment, here’s a look at how it works and how to set it up.
What is BNPL?
The BNPL is a short-term financing instrument that allows you to pay for your medium-sized purchases (typically $ 50 to $ 600) in monthly installments with no interest charges. They have become a permanent feature of the checkout pages of major retail sites like Urban Outfitters and Sephora, and have proven popular since the outbreak of the pandemic as the percentage of people using BNPL has jumped 18% since July last year. according to a recent Ascent poll .
Purchases are paid in installments for several months without interest. BNPL is sometimes referred to as “digital grace period”, although unlike actual grace period programs, you get the product right away. Part of the appeal of the BNPL is that you don’t need a good credit rating to qualify for this form of loan.
If there is no interest, what is the downside of the BNPL?
The BNPL does not charge constant interest like it does on a credit card, but does charge late fees ($ 10-15) and transaction fees (4-6%), which can hurt your credit score . And this is where the fine print matters – while BNPL companies don’t charge you interest at first, some of them will start doing so as soon as you delay your payments (PayPal doesn’t ).
All this to say: if you are prone to overspending or don’t have a realistic payment plan for your purchases, then you probably want to stay away from the BNPL and stick with the debit system.
How to use PayPal “Pay in 4”
Pay in 4 is easy to use if you know where to find it. When you’re on the checkout page on a retail site, look for the regular PayPal button as your payment method (there might also be a Pay Later button – both work). Assuming you already have a PayPal account associated with a debit or credit card, clicking this button will take you to the checkout screen. You may have to scroll down, but you should see “Pay Later” which has “Pay in 4” in it.
At this point, PayPal will perform a soft credit check (which will not damage your credit history) and you will be either approved or denied the transaction. If your application is approved, a payment summary (“four interest-free payments of $ 31.25 payable every two weeks starting today”) will appear, which you can accept by toggling the option and selecting “continue” at the bottom of the screen. …
If you are using a debit card, these funds will be automatically withdrawn on time (although be careful with overdraft fees). If your PayPal is linked to a credit card, set up automatic payments as soon as you buy something in installments (in case you forget to do it later).