Look to Air Canada for signs of how popular the Buy Now, Pay Later option is becoming when buying things online.
The airline has partnered with a company called Uplift to offer the option of paying for air travel in installments. “Spread the cost of your purchase over fixed monthly payments,” Air Canada says on its website. “Experience buyers joy.”
BNPL is embedded in e-commerce today through services like Uplift, Sezzle, Afterpay, PayBright, Affirm, Klarna, Flexiti and QuadPay. Retailers pay for these services because they help increase sales. But users may face late fees and interest charges.
There’s arguably a case for BNPL when used strategically and sparingly, say to buy a laptop computer. What BNPL won’t do is help you build your credit score if you use it responsibly. For now, the credit monitoring agency Equifax Canada does not use BNPL payment histories in calculating credit scores.
Julie Kuzmic, Equifax Canada’s senior compliance officer for consumer advocacy, said by e-mail that the company in the process of looking at how to handle BNPL payment data. “However, currently this information is not included in any credit scores.”
The risk with BNPL, and it’s considerable in light of the number of retailers offering it, is that people commit themselves to more monthly payments than they can handle and fall behind in their payments. Your credit score may not suffer by mishandling BNPL, but this could change.
Ms. Kuzmic said a next generation of BNPL services are starting to emerge, some similar to a traditional line of credit. Companies offering these new products may start reporting information to Equifax in the future, and in that case your payment history could affect your credit score.
A couple of thoughts for staying out of trouble with BNPL: Limit yourself to one or maybe two items paid for this way, and avoid using BNPL for items that won’t still be around and usable when your payments are done.
Finally, remember what BNPL is all about as a business. The mission is to get people to spend more.
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Rob’s personal finance reading list
The age of inflation
Prepare for long-term increases in the cost of living. The driver of this trend: The end of cheap goods and raw materials like steel, food and water. The author is Umair Haque, who has been described by one blogger as the “master of catastrophe.”
The real cost of speeding tickets
Not just the fine you get with your ticket. Your auto insurance premiums may also go up.
Moved to the country and not loving it
A first-person account of a couple who sold a house in Toronto in the pandemic and moved to rental in the country. Now, they’re wondering if they can afford to move back to the city.
So you bought a fixer-upper
Your top priority upgrades if you bought a house in rough shape to save money, including new paint, flooring and windows.
Today’s financial tool
Canada Revenue Agency on how to dispute one of its tax decisions.
The Money-Free Zone
Angelique Kidjo’s cover of Crosseyed and Painless by The Talking Heads popped up in my latest weekly Discover Weekly list on Spotify and blew every other song away.
Listen to this
Julie Kuzmic of Equifax Canada, quoted above on Buy Now Pay Later, was interviewed on the Take Back Talk Back podcast on how to understand your credit score.
Tweet of the week
This tweet has touched people: Older gentleman looking for similar for to meet for lunch and conversation.
ICYMI
What I’ve been writing about
- This is your top weapon for beating back inflation’s attack on your household finances
- ‘We’ve maxed out our TFSAs, RRSPs and RESPs – now what?’
- Parents gave their adult kids more than $10-billion to buy houses in the past year
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick