As the calendar inches closer to Christmas, it’s hard not to get caught up in the excitement of splurging over the festive season.
Yet, this season is taking place amidst a financial climate laden with high inflation and cost-of-living pressures. Financial worries are an all-too-common reality among South African consumers.
For example, the Money-Stress Tracker 2023, a report by Debtbusters, revealed a 22% rise in people experiencing anxiety around being able to make their monthly debt repayments. This is compounded by the fact that 70% of respondents spend more than 30% of their after-tax income on debt repayment. Furthermore, half of the respondents stated that running out of money before the month-end was their primary concern.
While gifting those you love (or yourself), is part of the festive season experience, it’s also important to remember that spending wisely is just as crucial, given the current financial climate.
The Popularity of Buy Now, Pay Later Over The Festive Season
In 2022, the use of Buy Now, Pay Later (BNPL) services took centre stage during the holiday season. This trend speaks volumes about the growing confidence in flexible payment options.
Regular BNPL services offer consumers the chance to spread the cost in equal instalments over a few weeks.
With the allure of deferred payments and easy access to credit, individuals can quickly accumulate new credit that they struggle to manage. The thrill of Festive season deals can also lead to impulse buying, and many shoppers may find themselves tempted to use BNPL for unnecessary purchases.
The problem is that those seemingly small payments can add up quickly, especially during the holiday season when one’s spending is already higher than usual.
When shoppers accumulate multiple BNPL purchases, each with its own repayment schedule, it becomes challenging to keep track of due dates and amounts. Late fees and interest charges can accumulate, creating a snowball effect of credit that’s difficult to escape. What began as a seemingly harmless decision to spread out payments can quickly evolve into a financial burden that lasts well beyond the holiday season.
Why Float is the No-Brainer Choice for Buy Now, Pay Later
Float’s card-linked instalment model has put a new spin on the buy now, pay later concept. Our instalment payment platform allows credit card holders to use the available limit on their credit card to split big orders into up to 24 interest-free monthly instalments. Since Float works with existing credit, and does not issue consumers with new credit, it’s a financial tool that’s not only super flexible, but also a responsible choice for making credit card purchases.
So, how does Float work exactly? It’s simple. You use your credit card as you usually would, and Float steps in to help you pay in bite-sized instalments. In essence, we make it easy for you to settle your credit card in full each month without the stress of additional financial commitments.
If you’re considering using BNPL for your festive season purchases, here’s a closer look at Float’s advantages.
No New Credit, No New Worries
Because Float works with your available credit limit, you won’t be applying for new credit, so there are no intrusive credit checks to fret about. It’s all about maximising the pros of your credit card while sidestepping the cons.
When you use Float to make a purchase, your available credit is reduced by the full purchase amount using a “reserve”, however, you’re only charged each month for the instalment amount. And the best part? Each instalment is interest-free. As you pay each monthly instalment, the amount reserved will reduce to the remaining balance of the purchase until your purchase is fully paid.
The reason that Float reduces your available credit limit by the full amount of the purchase is to act like a safety net, ensuring that you don’t overspend and giving you peace of mind as you make your way into 2025.
Importantly, it also ensures that you don’t accumulate regular credit card interest for the whole purchase, so you don’t have to worry about the additional financial burden that often comes with large outstanding credit card balances.
Monthly, Not Bi-Weekly Instalments
Float gives you the option to split your payments over up to 24 monthly instalments, as opposed to the bi-weekly instalments offered by some regular BNPL providers.
This monthly arrangement can help you steer clear of that dreaded January financial headache and bridge the gap until your first few 2025 paycheques arrive.
By spreading the cost over a more extended period, Float lets you enjoy festive season splurges without worrying about an impending financial crunch in the new year.
Imagine you want to buy something worth R10,000. With a six-month payment plan, you can split that R10,000 into six equal instalments. That means you’ll only have to pay around R1,667 per month over six months compared to a bi-weekly instalment required from traditional BNPL providers, which would be around R2,500 every 2 weeks over 6 weeks. Float’s monthly option gives you a bit more breathing room.
No Interest or Late Fees, Ever
Unlike many regular BNPL providers, Float doesn’t charge interest or late fees. But, and it’s an important “but” you still need to settle each monthly instalment on your credit card balance to avoid regular credit card interest. So, while Float buys you loads of extra time to settle the purchase on your credit card without adding to your financial burden with extra charges, it’s still essential to be responsible and make sure you can meet the credit card repayments for each monthly instalment.
How to use BNPL responsibly this Festive Season
Using Buy Now, Pay Later responsibly requires you to be informed, selective, and mindful of your budget and payment plan. You can use this payment solution to make your purchases more manageable, but only when you’ve assessed your finances. By following these tips, you can make the most of the season while also keeping your finances in check.
Evaluate Your Budget
Before you even begin spending, assessing and sticking to your budget is crucial. When you choose to pay with Float, assess whether you can comfortably afford to settle the single monthly instalment without compromising your financial stability.
Be Realistic
Be realistic about your financial situation. Regular buy now, pay later providers typically require consumers to settle the entire purchase over six weeks, which can lead to budget constraints. In contrast, Float offers a more flexible approach, allowing shoppers to make manageable payments without the immediate pressure of settling the full balance before the next payday.
Stick to One BNPL Account
When it comes to BNPL services, less is more. Using multiple BNPL accounts might seem like a good way to maximise your options, but it can quickly become a recipe for financial confusion. It’s all too easy to lose track of different due dates, terms, and varying interest rates. Instead, focus on one trusted BNPL provider, and you’ll simplify your financial responsibilities.
Be Consistent with Payments
Just because “buy now, pay later” options allow for deferred payments doesn’t mean you should neglect them. Ensuring that you have sufficient funds in your account to cover upcoming payments is essential. Doing so prevents you from accruing extra fees and interest and may also improve your credit score.
Shop Early
Many festive season deals started as early as Black Friday. Shopping early gives you more time to compare prices, think about your purchases, and make informed decisions. This can help prevent impulsive spending and reduce the likelihood of overspending.
Take Advantage of Online Shopping
Festive season shopping no longer means battling through crowded stores for that last-minute gift on Christmas eve. Online shopping has become increasingly popular in recent years, and retailers often offer exclusive online deals. You can shop from the comfort of your home, compare prices easily, and avoid the temptation of in-store impulse buys.
Final word
Buy Now, Pay Later can be a valuable financial tool when used responsibly, but the temptation to overspend in December should not be taken lightly. Instead of allowing the allure of instant gratification to lead you into impulsive spending, remember to shop responsibly and within your means.
For shoppers looking to spoil their loved ones (or themselves), Float offers the most flexible, frictionless and financially responsible instalment solution with zero fees and no interest. After all, the real goal of Christmas should be giving without compromising your financial wellbeing.