While BNPL plans can allow you to pay for purchases in installments without interest, they come with a cost can easily outweigh any Prime Day discounts. At least 16% of consumers using BNPL have missed payments, and 24% have said theoption caused them to overspend, according to a recent Bankrate survey. Let's take a look at the hidden costs of BNPL, and why you're better off paying upfront for all your Prime Day deals.
The main draw of these programs is the ability to "pay at your own pace." If you are required to pay a down payment, that is due at the time of the transaction. From there, your first monthly payment is usually due one month after your purchase is processed. Each following payment will be due one month later, on the same day of the month.
Of course, you need a separate Affirm account in addition to your Amazon Prime membership. The application process requires basic information including your name, mobile phone number, date of birth, and the last four digits of your Social Security number. Affirm performs a soft credit check initially, which doesn't impact your credit score, though they may conduct a hard inquiry for some loans.
It makes impulse spending easier
The ease of this sort of financing can make expensive purchases feel more affordable than they actually are. When you can buy a $800 tablet for "just $67 per month," it's easy to lose sight of the total cost, as well as your overall financial picture. In turn, this makes it all too easy to overspend on items you might not have purchased otherwise. You're better off taking a breath, stepping away from your shopping cart, and setting alerts to be notified when a product hits a price you can stomach.
It can impact your credit score
Currently, BNPL plans don’t directly impact users’ credit scores. But this fall, FICO says it will start including BNPL payment histories in its credit score calculations. So if you miss payments or default on the installment plan, it will cause damage to your credit score—making it even harder to get approved for mortgages, auto loans, credit cards, and other financing down the road. None of that risk is worth the Prime Day savings.
You'll have limited purchase protections
Although installment plans are helpful if you really need to finance something major, it’s best to avoid taking on debt for everyday expenses. Better to wait for a good price for something you truly need and can afford to pay for right now. To that end, keep checking back for more of Lifehacker's Prime Day coverage to find the best deals available during this summer's sale.
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