Buy now, pay later is so over.
First, it was credit cards. In the old days, it was layaway at your local department store. Now? Buy now, pay later (BNPL) schemes are popping up all over the internet.
But at what cost?
Even if BNPL schemes offer 0% interest, buy now, pay later schemes are bad news. We’ll tell you why.
What’s Buy Now, Pay Later?
Buy now, pay later schemes are the newest incarnation of credit. Credit cards allow you to purchase goods or services with borrowed capital and pay it off over the course of months. Naturally, credit providers charge interest for the convenience of being able to access that borrowed cash.
Over time? You can wind up paying buckets in interest, costing you more than if you’d just saved up to buy that trinket or gift outright.
Buy now, pay later is the online version of department store layaway: like credit cards, with less interest. These schemes often seem better than using a credit card, because many will charge 0% interest for a portion or all of the repayment period.
You get the thing you want today, and you pay it off in instalments every month. What could go wrong?
The Psychology Behind Buy Now, Pay Later
These schemes prey on one basic fact: as humans surrounded by so many glittering, tempting things, we suck at self restraint. When that amazing new status 8-in-1 kitchen pot/steamer/frying pan whatever pops up on your Instagram feed, your brain goes “I need that, like, yesterday.”
The buy now, pay later scheme can enable that kind of impulsive behaviour. And if there is one thing we know for certain, it’s that impulsiveness has no place in responsible financial management.
It is great that these schemes can provide interest-free alternatives to the worst of the lot—the credit card—but they can still get you where it hurts.
The psychology behind these schemes is well documented. Humans have an aversion to loss—this is why the cash budget works so well for some people. When forced to pay with cash—to hand our money over to someone else—we are acutely aware of how much we’re spending, and the pain of that loss generally causes us to spend less.
When we buy something on a BNPL scheme, we get The Thing right away for a low cost, and our brain goes “great! That was fantastic! What a deal.” We love our new object for a few weeks or months. But long after that shiny veneer of newness has worn off, well: the payments keep coming out of your account. That’s monthly pain for no new gain.
The fix? Buy something else via BNPL. And a cycle ensues.
The negative impacts of BNPL are quantifiable, too. According to LendingTree, two thirds of respondents to a recent survey said BNPL enabled them to spend more than they would have otherwise; and over 7 in 10 responding BNPL users were hit with steep penalty fees or interest if they missed a payment. It’s such bad news bears!
BNPL takes advantage of basic human impulses to convince us to spend money we don’t have. In Canada, over 50% of citizens are already living paycheck to paycheck. This frictionless, slippery slope way to spend cash is likely to only cause Canadians more strife.
Get the Buy Now, Pay Now Card
Eleven years in a row, Canadians have reported their #1 financial goal is getting out of debt. According to this research, 87% of respondents agree that they feel happiest and most confident when their finances are under control (this survey was conducted in America, not Canada, but we thought the data was powerful and wanted to share it with you!).
Regardless of any survey, we think many Canadians are well aware of what contributes most to their wellbeing when it comes to their finances. We make budgets, we plan for expenses, and we try to spend less than we make. Know what undermines all of those efforts?
Debt. Impulsiveness. BNPLs. The more you use schemes that enable spending, the more likely you probably are to overspend, and allow the debt cycle to continue.
As the old adage goes: if you can’t buy it with cash, don’t buy it.
So we’d like to introduce you to the antidote; the Buy Now, Pay Now card, if you will. Meet the Mogo Visa* Platinum Prepaid Card.
|GET MY FREE MOGOCARD|
Our prepaid card is designed to help Canadians get out (and stay out!) of debt. It’s prepaid, so you can’t overspend while using it. It’s got all of the spend control of a debit card with the perks and rewards of a credit card.
If you want to do money like you mean it and leave the debt cycle behind you, make sure you’re using the right tools for the job. The MogoCard is free, and offers credit score monitoring and identity fraud protection, plus every dollar you spend using the MogoCard enables us to offset 1 lb. of carbon emissions.2 Good for you. Good for your wallet. Good for the planet.
Say goodbye to buy now, pay later, and hello to financial control with Mogo.
This blog is provided for informational purposes only.
*Trademark of Visa International Service Association and used under licence by Peoples Trust Company. Mogo Visa Platinum Prepaid Card is issued by Peoples Trust Company pursuant to licence by Visa Int. and is subject to Terms and Conditions, visit mogo.ca for full details. Your MogoCard balance is not insured by the Canada Deposit Insurance Corporation (CDIC). MogoCard means the Mogo Visa Platinum Prepaid Card.
1-Bitcoin Cashback is a component of Mogo’s Rewards program. To be eligible you must have: (i) a Bitcoin & Rewards or MogoCrypto account; and (ii) the Mogo Visa Platinum Prepaid Card (“MogoCard”). Eligible MogoMembers will earn 2% Bitcoin Cashback on all eligible purchases. Bitcoin Cashback is earned monthly and based on all eligible purchases made in the preceding month. Mogo will determine the eligible 2% in fiat and will convert that fiat to satoshis according to the Satoshi Conversion set out in detail in the MogoAccount Terms and Conditions. All decisions regarding the conversion to satoshis by Mogo are final and binding. Additional eligibility requirements, transaction exclusions, and other terms are set out in full in the MogoAccount Terms and Conditions, which may be changed or terminated at any time without notice, see: https://www.mogo.ca/terms-and-conditions. Mogo cannot guarantee that the value of your Bitcoin Cashback will increase. If the price of bitcoin decreases then you may lose some or all of the value of your Bitcoin Rewards.
2-Free credit score is provided by Equifax and is only available to MogoAccount holders that have passed identity verification. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to assess your creditworthiness. The provision of this score to you is intended for your own educational use. Third parties will take into consideration other information in addition to a credit score when evaluating your creditworthiness. Equifax® is a registered trademark of Equifax Canada Co., used here under license. No one can prevent all identity fraud and Mogo does not monitor all transactions at all businesses. Currently, Mogo only monitors hard inquiries into the Equifax® Canada Co. credit bureau and will provide push and/or email notifications within 24 hours of the inquiry being reported. Refer to the MogoAccount Terms & Conditions for more information https://www.mogo.ca/terms-and-conditions. MogoCard holders will be entitled to receive free MogoProtect identity fraud protection and credit score monitoring so long as they remain active MogoCard holders. If you do not fund your card within 60 days of ordering or make a transaction on your MogoCard for more than 90 days, then you will not be considered “active” and will be opted out of MogoProtect and credit score.