The Right Way of Using Buy Now Pay Later Without Harming Your Finances

The Simple Sum

02 Apr 2024

This article is brought to you by StarHub.
You’ve probably seen the QR codes while standing in line to get your bubble tea, or the coloured button during checkout on your favourite online store giving you the option of spreading your payment into three instalments – it’s Buy Now, Pay Later (BNPL).
BNPL offers us the option to buy something we need (or want) and then pay for it in instalments over a few months. Welcome to the era of convenience!
Deferring payments so we simultaneously feel good about our bank account balance and still get to buy something can be a huge dopamine booster. But putting too many of your purchases on BNPL could leave you with more financial strain than you bargained for.   We’re not saying don’t use BNPL. We’re saying use BNPL strategically to help your finances, instead of ruining them.

Use BNPL only if you already have the money for the item

Before you BNPL, make sure you're standing on firm financial ground. To do that, you just need to follow this simple golden rule: only use BNPL for items you can already afford. That means you should have the full amount set aside in your savings to cover the purchase, and not simply the amount required for a single instalment. This ensures you’re not walking a financial tightrope trying to make those monthly instalments, or worse, being slapped with a late payment fee if you fail to make the instalment. Remember, your whole goal of BNPL is to have financial flexibility, not create unnecessary stress.

Use BNPL to unlock additional discounts and promotions

BNPL platforms and affiliated brands often roll out enticing discounts and special promotions specifically for payments made. This means paying less than you would have to pay if you paid the full amount for the item upfront. StarHub’s Star Plan, a no-contract SIM only plan, for instance, offers the flexibility to buy now pay later for a new phone, with discounts, for 12 or 24 months with 0% interest on monthly payments. A sleek new smartphone at a fraction of its retail price, thanks to a well-timed BNPL purchase? Yes, please! Not only do you get to split the cost into bite-sized payments, you also get to enjoy the satisfaction of a sweet deal. Of course, you should also remember to exercise financial prudence by ensuring that the item that you intend to get is an item that you have a purpose for and that you already have the budget for. Otherwise, you’ll be falling into the age-old financial trap of making a purchase simply because it’s on a discount. If you have ticked all boxes above, you could use BNPL to save yourself some money.

Use BNPL to maximise your savings

Why BNPL if you already have the money to pay for your purchase? Well, some people use BNPL so they can earn extra interest on their savings by deferring their payments. Picture this: You want to buy a $2,100 refrigerator for your newly-renovated BTO. By splitting the payments in three, you get to keep $1,400 in the bank now to earn interest on while enjoying the cool air wafting from your fridge when you peek in to find something to eat. The other way you are also able to save more is with your high interest savings accounts when you have split payments. Most accounts offer additional interest if you hit a minimum spend on your credit card. Some large ticket items are well above the minimum spend – splitting the payment into three lets you hit the minimum spend more easily for the three months, earning you the additional interest in your high interest savings account. Of course, don’t get carried away spending needlessly. The key to making BNPL work for you, instead of against you, is to stay disciplined. This means you need to diligently pay off your cards when they’re due, and have enough savings set aside to meet your monthly BNPL instalments. Talk about a financial win!

Smart financial moves

In the world of personal finance, the road to financial success is often paved with smart choices and strategic moves. BNPL can be a valuable tool, provided they are wielded with caution and foresight. Keep in mind, the essence of financial freedom lies in making choices that align with your long-term goals. So, go ahead, embrace the convenience of BNPL, but always keep a watchful eye on your financial well-being.
Content sponsored by StarHub Looking to upgrade to a new phone but don’t want to pay in full upfront? StarHub’s no-contract, SIM-only Star Plan lets you BNPL the latest phone models with instalments over 12 or 24 months with 0% interest on monthly payments. Unlike traditional phone contracts, you can also enjoy additional savings with discounts on your phone purchase when you opt to pay later with Star Plan. This makes it cheaper in the long run, which increases your savings. To find out how much you can save, check out our charts for a comparison on the different phone models.