In Your Debt: Buy now, pay later isn’t bad — but be careful

Those cheesy TV infomercials promising “three easy payments of $19.99” were quite ahead of their time. Though calling a toll-free number to buy as-seen-on-TV items is no longer in style, the idea of paying in installments remains popular thanks to a booming marketplace of buy now, pay later services.

With companies like Affirm and Klarna, and credit card issuers like Chase and Citi, you now have a variety of ways to divide up the cost of large purchases. Of course, there are rules and limitations — some BNPL services partner with specific merchants, while credit card companies require you to carry one of their cards to participate.

But limitations haven’t stopped it from becoming a trend. In June 2021, Competiscan, a company that tracks and analyzes direct marketing activity, noted a 530% increase in BNPL email marketing campaigns in the past year, with 28% of retail emails mentioning BNPL in the first quarter of 2021.

BNPL is still a form of debt, though. If you’re debt-averse and would rather save up for major purchases and pay for them in full, that is indeed an excellent tactic. But debt isn’t inherently evil. It’s merely a financial tool that can make major purchases more manageable. As with any financial tool, it’s all about how you wield it. Here are some ways to use BNPL thoughtfully.

KNOW WHAT YOU CAN AFFORD

Andrew Gold, a financial advisor at Prestige Wealth Management in Southlake, Texas, has used BNPL services to finance large purchases, including travel bookings, business purchases and a new mattress. As someone who frequently discusses spending with clients, he recommends considering BNPL when you can afford to pay for something in full, but paying in installments would help you better manage your cash flow. Before you choose a payment plan, review what...