Amazon offers several buy now, pay later (BNPL) options that let customers stretch purchases into multiple payments without incurring interest payments or fees. On first glance, this could seem like a good way to save money, at least up front — and these options can be valuable tools for responsible spenders, but they also come with dangers that can get careless shoppers into trouble.
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Before using any Amazon BNPL service, ensure you understand how it could negatively or positively impact your budget.
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A Look at Amazon’s BNPL Options
Amazon offers the following ways to stretch out purchases without paying interest.
Amazon Monthly Payments: Down payment due when product ships, with four subsequent installments automatically paid after 30, 60, 90 and 120 days.
Amazon Equal Pay: Prime Visa cardholders can split purchases of $50 or more into six equal, interest-free monthly payments or 12 payments for purchases of $250 or more.
Amazon Special Financing: Split purchases into six monthly payments for purchases of $50 or more, 12 months when you spend $600 or more or 24 months for select purchases with the Amazon Secured Card.
Third-party providers: Amazon supports outside BNPL providers like Zip, Affirm and Klarna.
Here are some ways that using any of these services could impact your budget for better or worse.
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Better: You Can Expand Your Purchasing Power
Like all BNPL offerings, Amazon shoppers can leverage these services to fit purchases into their budgets that they otherwise couldn’t comfortably afford. By converting one expenditure into four, six or even 12 payments, families on a budget can buy things they need but can’t spring for upfront without straining their finances.
Better: You Can Borrow Without a Credit Check
Some BNPL platforms check your credit, but not Amazon Monthly Payments. The company does not use your credit report to determine eligibility, but instead considers factors like the product, its price and your purchasing history with Amazon.
A hard pull can ding your credit, which Amazon BNPL users don’t have to worry about.
Better: You Can Finance Purchases Without Finance Charges
Amazon’s BNPL options free your budget from the pressures of finance charges. Since Amazon doesn’t charge interest like credit cards, users unburden their budgets from paying for the service of splitting purchases into installments.
Worse: You’ll Forfeit Valuable Visa Rewards
The primary benefit of the Amazon Prime Visa card is that it pays 5% cash back on all eligible purchases — more, in some cases, for shoppers who agree to an extended shipping timeline.
However, cardholders forfeit their lucrative cash-back rewards if they opt for equal payments through Amazon Equal Pay — you must pick one or the other.
Worse: You’ll Have To Choose Carefully
Amazon Monthly Payments allows only one purchase per category — like electronics or home goods — per monthly payment plan. By putting one purchase on a plan, you could lose the opportunity to do the same with something you want more in the future.
Worse: The Risk of Overspending
Failing to make scheduled payments can trigger interest charges, late fees or an automatic pull of the full purchase price from your chosen payment method from Amazon — and it’s not an unrealistic outcome for careless users.
According to Charles Schwab, BNPL services — on Amazon or otherwise — can encourage overspending and impulse buying by instilling false confidence and an unrealistically optimistic sense of purchasing power.
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Sources
Charles Schwab, “5 Risks of Buy Now, Pay Later.”
This article originally appeared on GOBankingRates.com: 6 Ways Amazon’s Buy Now, Pay Later Program Will Change Your Budget for the Better or Worse
