Millennials are using Buy Now, Pay Later (BNPL) platforms for everyday essentials like grocery shopping. According to PYMNTS’ study “The Credit Economy: How Younger Consumers Make Credit Decisions,” 15% of millennials who pay via BNPL said that their last such transaction was for groceries.
“The rise of buy now, pay later usage for groceries tells us that consumers are likely making bigger purchases online to take advantage of special promotions and stock up on staples, thus managing living expenses in more flexible ways,” said Vivek Pandya, lead analyst of Adobe Digital Insights, in an Adobe Analytics release.
The best Buy Now, Pay Later apps are indeed flexible these days, offering you the option to pay for anything ranging from gas to flights. But is it actually a good idea to leverage payment plans for daily expenses? Or can it hurt your credit? Here’s what you need to know.
How BNPL can help you manage your money
BNPL apps can be a smart choice for everyday essentials if you use them strategically. Service providers often partner with various retailers, both online and offline, to provide users with exclusive discounts, promotions, and special offers. This can lead to significant savings on purchases, allowing you to stretch your budget further.
With BNPL, you can spread out payments over time, breaking them into smaller, manageable installments. This feature can help you maintain better cash flow management by avoiding large upfront payments. It can be particularly useful if you want to make a significant purchase but prefer not to deplete all your savings at once. Not to mention the fact that you can often pay in installments interest-free for a certain period of time, which is better than taking out a loan or applying for a credit card.
Additionally, BNPL apps often provide a streamlined and convenient purchasing experience. With a few clicks, users can complete a transaction, bypassing the lengthy process of traditional financing or credit applications. This efficiency makes it easier for users to make purchases on the go and take advantage of time-sensitive discounts.
The potential pitfalls of BNPL apps
That said, there are potential downsides to becoming a regular BNPL user if you’re not careful. One risk is the temptation to overspend. The convenience of splitting payments into smaller installments may lead users to make impulsive purchases beyond their means, accumulating debt. Late payments can result in high-interest rates or late fees, impacting financial stability.
Additionally, using multiple BNPL apps simultaneously may make it challenging to track payment schedules and obligations. Failure to meet payment obligations can negatively affect credit scores. Lastly, relying too heavily on BNPL apps may hinder developing disciplined spending habits and savings strategies, potentially impacting long-term financial goals.
Careful budgeting, responsible borrowing, and regular monitoring of payment obligations are crucial to avoid falling into debt and maintaining financial well-being. That said, millennials may be onto something by using BNPL for everyday essentials, as those apps often come with discounts and can support healthy cash flow management.