October's Basecamp Newsletter

We know, it's only October and for a lot of us, the Holiday Season is the furthest thing from most of our minds. But, when you look at the calendar, the holiday season is only a few paychecks away. 

Planning ahead will help you avoid overspending and needing to lean on your credit cards or Buy Now Pay Later services to pay for items you can't afford. 

Buy Now Pay Later services lead to overspending 

Buy Now Pay Later services are available mostly through online services and have also become available for some in-store purchases. These services break up your purchase into four equal payments but do not report your payments to the credit bureaus. 

Last year during the Holiday Season, it was estimated that Buy Now Pay Later services accounted for $16.6 billion in online spending, a 14% increase compared to 2022.¹ The issue with Buy Now Pay Later services is that, as you make individual purchases that are broken down into small installments, you may not realize how much your obligation will be in two weeks. This can be especially true when different retailers use different Buy Now Pay Later services, making it harder to keep track of how much you're accruing with each service. Furthermore, it can be hard for you to keep track of multiple due dates from multiple services. 

These services are an attractive alternative to credit cards for consumers because they allow you to make your payments in installments, but do not charge interest on the balance you have with them. A large purchase broken down into a smaller payment feels more manageable to most people than making it in one purchase. Ultimately the price you pay for this is that your consistent history of making payments to these businesses is not reported to any credit bureau, meaning you're not improving your credit score. 

Phantom Debt 

There is no central authority that these services report to, so it's actually not possible to determine how much people owe in total to Buy Now Pay Later services. This means that total consumer debt levels, which reached an all-time high this year, could be even higher than we know.² 

Buy Now Pay Later companies defend their product, pointing out that a version of Buy Now Pay Later has been available for consumers in the form of layaway or financing for a long time. 

Either way, the lack of transparency surrounding these services seems to give both consumers and industry professionals a bit of concern about the state of consumer debt. Buy Now Pay Later Services are more widely available than layaway services, and the lack of transparency surrounding them and lack of regulation makes some worried. 

As a whole, our recommendation is to purchase what you can afford, regardless of how you choose to pay for them. If you can pay for them, but want to add more wiggle room to your monthly budget by using a Buy Now Pay Later service, then go for it! But don't get caught in a web of Buy Now Pay Later payments that are too much to handle a couple weeks down the line. 

Come up with a plan now 

While it may sound obvious, coming up with a plan before you start your Holiday shopping is one of the best ways to avoid overspending. There's almost always one or two last minute gifts that come up, but coming up with a budget and a list of the gifts you know you want to give will help you stay on track as you start to shop. Keeping a list like this will also help you keep an eye out for the right sales as retailers start offering discounts leading into the holiday season. 

Just like having a budget or avoiding grocery shopping while hungry, doing your holiday shopping with a budget and a list will help you avoid making too many impulse purchases that cause you to overspend. 

Click below for a few more tips on taking charge of your holiday budget.