Are Shop Now, Pay Later Agreements Ethical?
The pros and cons of using shop now, pay later payment providers:
Troupe introduced Afterpay payment in 2020 as a way to intentionally budget when it came to your skincare routine. Prior to launching it, we fell into the throes of whether or not it made sense for our website. Accessibility is important to us, but financial responsibility is a priority. While we ultimately felt that it’s a powerful tool that can change the way we spend in a positive way, with any new technology, bad can come along with it.
We intentionally chose AfterPay as our buy now, pay later partner because we felt like they were one of the providers that didn’t have a “catch” when using it. There were no hidden interest rates or damaging credit score checks, and they wouldn’t require lengthy pay off periods in a selfish attempt to increase the pay off amount.
With the growth in popularity, we believe it’s super important to know how these can impact your bank account, credit score, or even credit history. As a retailer that’s adamant on transparency for the entire shopping and customer experience, we wanted to share the pros and cons we weighed when it came to introducing AfterPay to Troupe’s checkout options. This way you can make the decision to use these services for yourself because everyone’s financial needs are unique to themselves and their bank account.
It creates accessibility
We believe that accessibility with the financial services landscape is something that is not synonymous with the industry. It’s the exact opposite. When it comes to making purchases that are larger, we’ve typically resorted to placing these purchases on credit cards which isn’t terrible if you’re paying them off in a timely manner in order to avoid fast-growing interest.
Depending on the buy now, pay later provider, you are able to breakdown the payments of purchases over time without jeopardizing your finances in the short term.
We’re not telling you to use these services in order to access luxury goods that you maybe shouldn’t be spending on if you can’t afford it in general, but it provides access to things that make our lives better - like a skincare routine so you can look and feel like the best version of yourself or that new couch you’ve been desperately needing.
It can be a great alternative to credit cards
Credit cards are a necessity but when used responsibly, they can have a positive impact on your overall credit. If you’re about putting a specific purchase on a credit card, shop now, pay later is a great way to plan for purchases but only if it’s already interest-free.
It makes budgeting for larger purchases easier
When it comes to managing personal finances, planning is everything. Unexpected expenses are a part of life, but we have the luxury of planning for the things that are in our control. When it comes to thought out purchases for things that you want or need, the luxury of spreading it out over two or several months can help improve quality of life. Things like mattresses, fitness equipment (looking at you Peleton), furniture, or let’s not be too hard on ourselves, those new shoes you’ve been eyeing, all become within reach.
It’s easy to lose track of spending
Split payment providers make it easy to spend money, therefore it’s easy to build up tons of payments that are being taken from our accounts at different times. Sometimes, we don’t realize the long-term impact of the short-term decisions we make when it comes to planning for these purchases and are unaware of what’s really coming out of our accounts.
Going to use one of these tools? Make sure you’re tracking all of your expenses so you don’t end up spending more than you can afford to.
You can sometimes earn interest
Not all providers are made the same. Services like Klarna and Affirm check your credit score (which can hurt it in the short term) and charge interest and fees when it comes to using their offerings. While these providers will paint a clear picture of what you’ll end up owing over time, make sure you have an understanding of what you’ll be spending at the end of the day and how many months it will take to pay it off. Sometimes they end up being not that different from using a credit card, and when used responsibly, credit cards have a different set of perks.
It promotes irresponsible spending
This is a subjective category that can be viewed in different ways. Buy now, pay later service provide access to things that you might not have been able to afford before, but it can quickly encourage spending on things that you’re not ready to financially be purchasing yet. Know what you’re spending and why you’re buying it.
Read the fine print
Every service provider is different and has different requirements for using their software. We intentionally chose After Pay because there were no hidden catches - they wouldn’t check your credit score, causing a negative dip and they wouldn’t charge interest over the four split-payments. They would essentially make the retailer (us) responsible for the fees, rather than the customer. We felt like that was fair in an effort to make sure you don’t spend more than you thought you would on Troupe.
If you can’t afford it in full now, you probably shouldn’t buy it
As every person of influence in our lives has likely told us, just because you can, doesn’t mean you should. If you can’t afford to purchase something new, you should probably continue planning and saving for it until you won’t get extreme anxiety over it. Give yourself the gift of sanity. If you’re going to have one large purchase, make sure you only have one at a time.
Keep track of the total amount of payments you have processing across purchases
Shop Now, Pay Later apps can be dangerous when it comes to purchasing. It makes it easy to spend and easy to lose track of purchases. Sometimes it almost feels intentional, especially when it comes to some service providers who promote you to shop and use their services in partnership with other brands and retailers.
By using a proper budget, you can make sure you know what you’re spending and when those payments will process so you can protect your bank account.