Given the time of year that's in it, it’s probably a safe guess that not many people want to hear what financial advisor Eoin McGee has to say about Buy Now, Pay Later (BNPL): if you can’t afford it today, don’t buy it. So when Claire Byrne raised just the notion of buying, for example, a sofa in instalments, Eoin was having none of it:
"If you can’t afford the sofa today, you can’t afford the sofa. It’s that straightforward."
But it’s such a nice sofa... Ok, fair enough, Claire says, but what if your fridge is beyond repair and you need to replace it, but you don’t have the wherewithal to pay for it all in one go? BNPL may not suit this hypothetical fridge shopper, as the companies will run extensive credit stress tests on you and they may decide you’re not the sort of customer they want to advance money to.
"If you can’t afford it this month, it’s unlikely that the expensive fridge – or whatever the price of the fridge – spreading it over three months is going to make much more of a difference. I’d much prefer to see you getting into bed with the credit union, or some of these companies that the interest rate is very transparent, it’s very easy to go in and make extra payments on it and just to do it in a more traditional way is my preference."
The whole idea of BNPL, Eoin believes, encourages what Claire calls "frivolous spending". There are stats from Australia and the UK that show that a lot of the people using BNPL services to buy goods really shouldn’t be buying anything in the frivolous area.
"These are people who really want to enjoy today and they’re borrowing from the future to pay for it today. Don’t dress it up in any other way. This is borrowing money. It might be zero interest, but if you can’t afford it today, wait three months and buy it then."
This three-month cooling off period is similar to Eoin’s oft-repeated delayed gratification rule: if you put off your purchase for 72 hours, it’ll give you time to think about it, to work out if you really wanted it and weren’t just succumbing to marketing pressures.
"If you can delay the purchase a little bit, it really reminds you of the stuff that adds value to your life and the stuff that doesn’t. And this [BNPL] encourages the behaviour of 'just get it now, just go for it.’"
Finally, Eoin had another warning for would-be BNPLers: this practice is not currently regulated by the Central Bank, so buyer beware is the obvious caution there. Back slowly away from that sofa. (Eoin did add that legislation is coming, but it’s not there yet.)
You can hear the full conversation between Claire and Eoin McGee by going here.