debt

Pay-Over-Time: Worthwhile or Waste?

Personal Finance /

Pay-Over-Time (also known as Buy Now Pay Later, or BNPL for short) has become popular in recent years. Each purchase is split into smaller chunks so people don’t have to immediately pay the full amount. Consumers are financing everything from pizza deliveries to luxury goods. The industry is already worth billions and expected to continue growing at a rapid pace. Sources generally seem to believe the market will grow 20-30% over the next decade.

But does it make sense to use such services?

In general, no. You should never spend beyond your means. Many people aren’t using credit responsibly, and it’s easy to overspend when even small purchases are financed. The video game concept of “microtransactions” has entered retail. Many BNPL purchases are another form of accumulating consumer debt. The majority of people should treat credit cards as debit cards and ignore pay-over-time services. Don’t purchase things unless you can afford them. The best form of financial responsibility is usually to set a budget and stick by it. BNPL should only be used (1) when absolutely necessary to get through hard times, and (2) with zero fees and zero interest whenever possible.

We do acknowledge that pay-over-time makes sense in certain circumstances. Credit cards have high rates. Interest can be a killer if credit cards aren’t paid off in full each month. If it’s possible to avoid credit card APR and BNPL is a legitimate help for a particular purchase, then BNPL may work out in the end.

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Several Ways To Immediately Get Interest Free Capital

Personal Finance /

Sometimes you need extra cash and don’t want to have a loan. Here are nearly a dozen ways to get immediate access to interest-free capital and/or earn easy money from banks. If you have a high risk tolerance, some of these might work in lieu of an emergency fund. It’s hard to keep cash around in a high-inflation environment like we’re currently in.

 

1. Open a new bank account

Banks offer sign-up bonuses to try and gain new customers. Some offers are aggressive and can exceed $1,000. There’s generally a direct deposit requirement (checking accounts) or cash deposit requirement (savings or brokerage accounts). This is still a low-effort way to get some extra money. Especially if you have a large cash balance in an existing checking/savings account. The size of your bonus is likely to exceed whatever you’re earning in interest (generally 1% APY at most, as of early 2022).

Opening new bank accounts doesn’t impact your credit score either. There is a pseudo-credit system (ChexSystems) which may flag you if you open several bank accounts each year. It doesn’t however affect your ability to get loans or credit cards.

Many banks don’t have minimum balance requirements or significant fees. These are ideal considerations when looking for a new account.

 

2. Open a new credit card account

Like the above option, banks have aggressive offers for credit cards too. If you’re able to get a 0% APR deal on top of that, it’s even better. There are 15+ credit cards with long interest-free periods. Although there are minimum spending requirements, it’s generally not a high bar to clear, especially if you have a large purchase coming up. Different cards have different requirements.

Imagine being paid a couple hundred dollars to get an interest-free loan for 12+ months, plus earning ongoing cash back rewards. If you have a high enough credit score to qualify for a 0% APR card, it can be a better deal than a personal loan.

For “free debt” you can “float” your balances. Open a 0% APR card, earn its bonuses, and put your living expenses on that card until you’re near the limit. Then, before the 0% APR period expires, open another 0% APR card and repeat. This may affect your credit score, so this isn’t a solution for everyone. If it works for you though, you can repeat this infinitely to enjoy a large amount of “free” money. The main downside is that this isn’t immediate, when it comes to personal expenses. The card is likely to fill up over time. Still useful, but not the fastest injection of cash into your life.

 

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