Buy Now Pay Later makes festive shopping easy but risky:Is it a smart payment option or debt trap?

Diwali has arrived, and Chhath Puja is around the corner, the festive season sales are in full gear. E-commerce sites, shopkeepers, small and big, malls and other businesses are already offering tantalising deals and discounts on various products for customers. During these times, if you aren’t careful, chances are that you may go overdrive in your shopping spree and end up in a debt trap. It is especially relevant for credit card owners who may splurge in a shopping binge, ignoring their financial health. A case in point is the “Buy Now, Pay Later” (BNPL) scheme offered by credit card companies. As the name suggests, it allows you to buy products and pay later. However, you should think twice before opting for this plan if you do not have ready cash or adequate repayment ability. While BNPL scheme has become a popular payment method, think through whether it is safe for your pocket, or just another way to accumulate debt. So, let’s explore the scheme in detail. Typically, apps and online stores offer zero or no-cost EMIs or “three easy installment” options. It is easy: make the transaction today, but pay later. Secure A Small Loan With Your Phone Number and PAN Card BNPL helps you buy things quickly without any hassle. Unlike credit cards, you simply need a phone number and a PAN card. Young people who do not have a credit history and looking for small loans, BNPL can be an option. However, there’s a downside – it can lead to overspending. Hidden Charges Behind Zero or No Cost Most BNPL schemes state that if you pay on time, there is no interest. But if a payment is missed, late fees, penalties, and sometimes even interest as high as credit cards are charged. What was a free installment option suddenly becomes an expensive loan. What Is Its Effect On Your Credit Score? You might not know this, but BNPL transactions are reported to credit bureaus. If payments are late or missed, your CIBIL score can drop, just like it does when you miss an EMI. Moreover, if you are using BNPL on multiple apps, keeping track of due dates becomes difficult, and you can subtly fall into a debt trap. BNPL: A Debt Trap For The Careless BNPL affects you most mentally. Because you don’t have to pay immediately, BNPL encourages you to spend more than you need.
Many small expenses add up to a large amount, and when it’s time to pay all the installments at once, people get stressed. Therefore, experts say that BNPL is fine in an emergency, but if you are not disciplined, it is a slippery slope. How To Use BNPL Smartly? BNPL is a good instant credit facility if used carefully, like a credit card. Using it for essential payments and strictly adhering to payment dates can benefit you greatly. At the same time, it is important to avoid taking credit on multiple apps simultaneously. If you do impulse shopping, it’s better to stay away from BNPL. Instead, you should use a debit card or a ban credit.