Should you buy now, pay later for back to school? | Smart Change: Personal Finance

Jackie Veling

Inflation has been hitting family budgets all summer and the latest line item to take a hit is school supplies.

According to the National Retail Federation, which released its annual back-to-school survey in July 2022, shoppers felt the pressure, cutting spending in other categories and working longer hours to cover school supplies.

They’re also looking for ways to stretch their money even further, but purchase sales and clipping coupons aren’t the only options anymore.

According to the survey, some are turning to “buy now, pay later,” a type of payment plan available at most major retailers, to split their back-to-school purchases. Although BNPL plans may come with zero interest and no fees if you pay on time, they are still risky and there may be better ways to manage your cash flow.

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How do the BNPL payment plans work?

BNPL plans vary by provider, but they all divide your purchase into smaller installments, which you pay off over time.

The most popular plan is the pay-in-four, offered by almost every major BNPL provider. With pay-in-four, your purchase is split into four equal payments. You typically make your first payment at checkout, with the three remaining payments automatically billed to your original payment method every two weeks until full payment is made.

For example, let’s say you have a cart totaling $ 600. You’ll pay $ 150 at checkout, then three remaining payments, each $ 150, over the next six weeks.

Popular BNPL providers like Affirm, Afterpay, and Klarna don’t charge interest for using their pay-in-four plans, so if you pay on time, there’s no extra cost. If you miss a payment, some suppliers charge a fee, which increases the cost of your purchase.

BNPL options are integrated directly into retailer websites, such as Target, Staples, Best Buy, and Walmart. When shopping online, you may see the option to use BNPL at checkout. If you agree, you will fill out a short application, which does not include a physical credit check, so there is no risk to your credit score.

Approval decisions are instant and can depend on factors such as the money available on your debit or credit card, the cost of your purchase, the store you are shopping at, and any previous history you have with the supplier. Your credit score is usually not a deciding factor in your application, so if you have fair or bad credit (credit score 689 or lower), you may still be eligible for BNPL.

You can also shop in person by downloading a BNPL virtual card from the provider’s mobile app, which scans at the checkout.

Should you use BNPL for school supplies?

Robert Bertman, a Clayton, Missouri-based certified financial planner who works with families, says many of his clients have used BNPL and, while that’s not automatically a bad thing, urges caution.

Since the smaller installments make it seem like you’re spending less than you really are, it’s easy to overdo it.

“It’s a psychological trick,” Bertman says. “It’s disguised as an attempt to make things more convenient for people, but it can also make people spend more than they intended.”

He recommends keeping the total cost of your purchase front and center by asking yourself: If you could afford to pay now, would you? Or is there another place you would rather put that money?

Andrea Woroch, a consumer finance and budgeting expert based in Bakersfield, California, says she sees people get in trouble when they try to run multiple BNPL plans at the same time.

Although the payouts are often small, they add up. And with more than one plan running at a time, it’s easy to fall behind or overshoot your account, which can mean fees for delays from the BNPL provider and penalties from your bank or credit card issuer.

If you’d like to use BNPL, Woroch recommends saving it for a back-to-school essential purchase, perhaps the hardest to cover outright, like a laptop or tablet. Just make sure you can afford the installments.

Other ways to save for back to school

If you’re looking for other ways to ease the burden of back-to-school shopping, Woroch’s best advice for parents is to shop at home first.

Reusing old folders, half-used notebooks, forgotten binders, and whatever pen and marker you have lying around saves more money than you might think. It can also help children learn the importance of money management.

“I know kids love having brand new things, but this is a really great opportunity to teach them about budgeting,” says Woroch. “He explains to them: ‘If we reuse this backpack, we can get those sneakers you really want.'”

Also, by delaying your shopping, you will miss the high season of back to school. When you go to restock, you’ll likely find bigger discounts, as retailers will try to empty their inventory.

For parents looking to cut spending across the board and make more room for seasonal spending like school supplies, Bertman recommends counting transactions, not dollars.

For example, he often advises customers to cut back on their weekly trips to the grocery store. Although the price per trip goes up, your monthly grocery bill goes down because there is less chance of overspending.

“I don’t know anyone who walks through the store without adding extra stuff to the cart,” he says. “The more often we visit a place, the more likely we will end up with things we didn’t need.”

Start by calculating how many times you swipe your card per day – morning coffee is one, grocery store is two, dinner order is three – then reduce by one. At the end of the month, you can apply the savings to your back-to-school spending.


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