In the previous lesson, we explained that choosing to pay later means taking on a debt. In this lesson, we’re zooming in on credit to talk about the different ways you can pay later using it— and what to watch out for if you use these options.

Buy now, pay later

As you may have noticed, online services that allow you to pay afterwards are becoming more commonplace, with providers such as Klarna and Riverty now a fixture in the checkout stage of most online shopping platforms. Amazon, Bol.com, ASOS and Zalando are examples of webshops offering Buy Now, Pay Later (BNPL).

Pay-later options can be convenient if you want to see or try the product before paying for it. During the payment period, you often aren’t required to pay interest.

This changes, however, when you fail to keep to the payment deadlines. If you pay late, your costs can increase quickly. BNPL providers are allowed to pass reminder and collection costs on to you, which means a purchase that originally cost €20 could suddenly cost €60, if €40 of debt collection fees are added.

Credit cards

Using a credit card is another option that allows you to pay later. Your credit card collects all transactions made during the month and then charges them to your bank account in one single payment.

One advantage of credit cards is that they’re accepted almost everywhere in the world. Some services, such as car rental, might even require you to use a credit card. Credit cards offer certain protections that a regular debit card does not, such as a chargeback scheme. This allows you to dispute transactions you don’t recognise or trust.

A disadvantage is that credit cards usually come with costs. You pay an annual fee for the card itself, and you often pay extra fees when withdrawing cash from an ATM.

Another drawback is that you may lose track of how many transactions are still outstanding. The monthly deduction can then come as an unpleasant surprise.

Paying later: what to watch out for

There can be valid reasons to pay afterwards. But it is important to stay in control. Know which payments are coming up, make sure you pay on time and check that there is enough money in your account when an automatic payment is due.

Takeaways

• Buy Now, Pay Later services and credit cards enable you to pay for purchases after receiving them.

• Paying later can be convenient if you want to see or use a product before paying.

• It’s important to keep track of what you still owe and pay on time, otherwise additional costs start adding up.