Buy now, pay later is a convenient way to pay if you do not have the cash, but it can come with risks
Buy now, pay later has become a lifeline for people who do not always have the cash when they want to buy something, but, like all credit, it can come back to bite you if you do not pay it back on time.
It starts with that air fryer you have been eyeing for months that is finally on sale for R2 000, but you only have R1 000 available today. But wait! What about the Buy now, pay later (BNPL) option? You get the air fryer immediately and your payments only start later. No interest. No waiting. It feels like a smart workaround. But, there is a catch.
Afua Darko, business head at Sanlam credit solutions, warns if you miss a payment – even once – penalty fees and default charges can add up quickly. “And when an account goes into default, it can even negatively affect your credit record in some cases.
“BNPL is designed to feel light, simple and low-risk and that is what makes it tempting. But if it seems too good to be true, pause. Someone is carrying the cost and the consumer is usually the one who pays it later.”
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Fine print of the buy now, pay later agreement
She encourages consumers to always read the fine print.
“Before you enter a BNPL agreement, double check that you have read the fine print to ensure that you fully understand how long the interest-free period lasts (do not assume six months), and what happens if you miss a payment.
“Typically, if you default, there will be fees, interest and penalties to pay. In addition, some BNPL providers are members of the South African Credit and Risk Reporting Association (SACRRA), which means that your missed payment could be reported to and recorded by credit bureaus.
“Certain BNPL providers allow clients to change their payment terms into a credit agreement, which is then reflected on their credit reports. The bottom line? In some cases, a missed BNPL payment can negatively affect your credit score.”
If you are worried that you may already have missed a BNPL payment, Darko suggests checking your credit record early. You are entitled to one free credit report per year that you can also access on the Sanlam Credit Solutions platform to see if your score has been affected.
“If a BNPL default is showing, focus on paying the outstanding amount as soon as possible and then be very consistent with keeping other debt payments up to date to rebuild your score over time.”
Darko also warns consumers about the fact that Black Friday is designed to create urgency. “If BNPL is the only way you can afford the item, it is your signal to step back and rethink your purchase.”
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How to shop safely this Black Friday
Darko suggests:
- Plan ahead what you will buy. Check the item’s usual price and your walk-away limit. Do not wait for Black Friday, as sale prices are often consistent throughout the month.
- Read the terms in full. If the language is difficult, copy the terms into an AI or translation tool and ask it to summarise when penalties apply and how quickly they can do so. Do not assume a six-month zero-interest grace period and remember that interest may often kick in after two weeks.
- Check if the provider is a registered credit provider. This determines what recourse you have if something goes wrong.
- Stress-test your repayment. If instalments run every two weeks, where will the money actually come from for you to pay up? If you cannot afford it now, how will you afford it later?
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Can you afford buy now, pay later if there’s an emergency?
“Most people do not enter a BNPL agreement intending to default; something simply changes. A salary is delayed, a medical expense comes up, or another bill suddenly becomes urgent. However, once you missed a BNPL payment, the agreement can shift very quickly.
“This is where penalties and fees are applied. Each provider operates differently and the total cost can escalate faster than you expect.”
She says the bottom line is that BNPL can work if you already know where the money is coming from.
“But if you are hoping something will change in the next pay cycle so that you afford it, that is where the danger lies. If you feel unsure and want to speak to someone, reach out to a professional like your financial adviser or one of the free coaches on our platform.”