Four Reasons Not to Use Buy Now, Pay Later Deals on Black Friday
Buckle up: Amazon’s Black Friday sale is just around the corner. This year, the weeklong sale runs from November 20th to 28th, and many early bird deals are already available. As you add items to your cart, you might be tempted by Amazon’s “affordable monthly payment system.” Also known as “buy now, pay later” (BNPL), it’s an enticing approach: buy what you need now and pay later, ” at your convenience .” But as convenient as it may sound, you might want to think twice before taking advantage of the “buy now, pay later” option during Black Friday.
While BNPL plans allow you to pay for purchases in installments without interest, they come with costs that can easily outweigh any Black Friday discounts. Let’s explore the hidden costs of BNPL and why it’s more beneficial to pay upfront for all Black Friday deals.
How does Amazon’s “buy now, pay later” option work?
Amazon doesn’t have its own “buy now, pay later” program. Instead, they partner with a major BNPL provider, Affirm. When you check out on Amazon, you can select Affirm as your payment method. The process is simple: you select your items, click “Affirm” at checkout, complete a quick application, and receive an instant credit decision. Individual transactions initiated through Affirm are capped at $25,000, and there’s a daily limit of $100,000 for multiple purchases—but hopefully that won’t happen during a single Black Friday sale, right? ( Really?! )
The main advantage of these programs is the ability to “pay at your own pace.” If a down payment is required, it is made at checkout. After that, the first monthly payment is typically made the month after checkout. Each subsequent payment is made the following month, on the same day.
You can choose your term, typically 3, 6, 12, or 24 months, depending on the purchase amount and your credit history. Unlike traditional credit cards, Affirm shows you the exact payment amount and total cost upfront, without hidden fees or compound interest. (More on that below.)
Of course, in addition to an Amazon Prime membership, you’ll need a separate Affirm account. Applying requires basic information, including your name, phone number, date of birth, and the last four digits of your Social Security number. Affirm first runs a soft credit check, which doesn’t affect your credit score, although some loans may require a more robust check.
Now let’s look at four key risks to consider before hitting the BNPL button:
This makes impulsive spending easier.
The simplicity of this type of financing can make expensive purchases seem more affordable than they actually are. When you can buy a $999.99 tablet for just $67 per month, it’s easy to lose sight of the overall cost and your overall financial situation. This, in turn, makes it easy to overspend on things you wouldn’t otherwise buy. It’s best to take a breath, step away from your cart, and set up alerts to receive notifications when the price of an item reaches an acceptable level.
You may face unexpected interest charges.
The biggest danger with BNPL is missing a regular payment. While these plans are marketed as interest-free, in many cases this 0% APR offer is only valid if the balance is paid in full by a certain date. So, shopper beware: it’s easy to inadvertently incur high interest charges if you don’t pay off the balance before the promotion ends. Soon, that Black Friday discount offer won’t seem so great.
This may affect your credit score.
Starting this summer, BNPL purchases can impact your credit score . So, if you miss payments or default on your installment plan, it will negatively impact your credit score, making it even more difficult to get approved for mortgages, car loans, credit cards, and other types of financing in the future. But none of these risks are worth saving on Black Friday.
You will have limited purchase protection.
Using a credit card gives you valuable purchase protection, such as an extended warranty, price protection, and the ability to dispute fraudulent charges. BNPL plans typically don’t offer such guarantees. This means you’ll be left in a bind if something goes wrong with your Black Friday purchase and the merchant doesn’t make it right. It’s smart to only buy what you can afford during Amazon’s Black Friday sales, no matter how tempting the deals may seem.
While installment plans can be useful if you really need something big, it’s best to avoid loans for everyday expenses. It’s better to wait for a good price on something you really need and can afford right now. So, keep an eye on Lifehacker’s Black Friday news to find the best deals during the holiday sales.