What is Buy Now Pay Later?
The idea of splitting an expensive purchase into multiple instalments is not new. Banks and consumer companies have been offering it for many years.
But unlike existing services, Buy Now Pay Later (BNPL) providers — many of them startups — do not need to see your credit score to offer you instalment plans.
Popular BNPL Providers
Launched in 2019, Atome is one of the most well-known BNPL providers in Southeast Asia. They have a strong presence both online and offline and you can use it to shop with brands such as Sephora, Dyson, and Tangs.
For in-store purchases, you scan and pay via the QR code provided with your mobile phone.
Atome also offers online shopping vouchers. First-time Atome users are given S$10 off their first online purchase.
Atome handles each payment by automatically deducting from the designated credit or debit card. Just make sure there are sufficient funds in your bank account before the repayment date.
If you miss the first repayment, you will be charged S$15. Subsequently, you will be charged up to S$30 for repayments not settled within the same month.
Grab PayLater is the only BNPL provider that allows you to pay over a period of four months, compared to three months with other providers. You can use Grab PayLater when you shop with brands like Hipvan, Asus, and groceries on GrabMart
Grab PayLater is only applicable for online purchases.
For every missed payment, you will be charged S$10.
You will not earn GrabRewards points if you pay for your purchase in instalments. But you get GrabRewards points if you use Grab PayLater Postpaid — a service that consolidates all your purchases into a single bill.
Both options are available once you activate PayLater within the Grab app.
In 2021, cashback site ShopBack acquired hoolah, which is now renamed as ShopBack PayLater. This BNPL service allows users to pay in instalments over three months and charges a late payment fee on every instalment you miss.
For orders under S$99, a late payment fee of S$5 applies. For orders between S$100 and S$999.99, S$15 charge applies. For orders above S$1,000, S$30 charge applies.
Launched in 2021, Pace is one of the newest BNPL kids on the block. It works with brands like Charles and Keith, Razer, and Canon to let you pay in instalments.
Pace’s late payment fee structure can be confusing compared to other BNPL providers. You are charged a low fixed late payment fee, as well as a fine for each day you miss your payment.
You will be charged an initial late payment fee, on top of a fine of S$1 for each day after the due date.
For orders under S$40, only one S$10 payment is levied for every late payment. For orders above S$40, late payment fees are 25% of the original order value or S$60, whichever is lower.
In March this year, Pace acquired Rely, another Singapore-based BNPL player, which means the two systems may be integrated in the future.
Pros and Cons of Using BNPL Services
1. You get what you want now
With BNPL services, you can now afford something that you may not have been able to pay for at one go in the past.
2. Instalments are interest-free with no hidden costs
Unlike credit card instalments, BNPL users do not have to worry about processing fees.
And you can make payments before the due date without worry about the hefty early repayment charges credit cards companies often charge.
1. Late payment fees
Late payment fees are a source of revenue for BNPL providers. You may think the late payment fees are small and you can afford it.
But they can add up and you could end up in debt if you are not careful.
2. Fixed payments due dates
You will not be able to choose your repayment dates with BNPL services. You also cannot postpone your payments to the following month.
BNPL vs Credit Card Instalments
If you use a credit card, you are required to pay a one-time processing fee that is a percentage of your transaction. You will also be charged an early payment fee if you try to pay earlier or cancel the credit card you paid with.
But credit card instalments count towards your card’s monthly minimum spend and rewards programmes.
Without processing and early repayment fees, BNPL providers charge you less for your purchase.
But if you use BNPL services, you need to follow your payment schedule attentively. There is no way to postpone your payments and the company issues a fixed due date for each payment.
You will be charged a late payment fee if you miss the due date, and they will suspend your account until the payment is made.
Use BNPL Services Responsibly
Plan your purchases
Before using a BNPL service, check your other financial commitments and to know if you will have enough cash to make the repayments. You do not want to end up in debt.
Planner Bee has a spending tracker that helps you manage your expenditure every month. Download the app here.
Set a reminder before payment due date
Avoid paying late payment fees by setting a reminder on your calendar.
Using a BNPL service is essentially borrowing money from your future income. Make sure you do not spend too much as there may be unexpected expenses in the coming months.
A Word of Caution
BNPL services create a false sense of affordability by splitting up the cost of the item. There is no credit check process, so it is easy to fall into debt if the user is not alert.