Buy Now. Pay Later. Is That A Good Idea?

A credit card. Oh, what a nifty little invention. Buy now, pay later. Most are probably guilty of walking into a store at some point in time and seeing something you just HAVE to have. So with the mindset of everyone's favorite housewife, Erika Jayne, you throw down your piece of plastic and walk out with your new goodies. 

So when exactly will you be paying that charge? Do you have enough money in your bank account to cover your next monthly bill? Or will you be racking up interest payments as you garner enough cash to eventually cover your big splurge?

I grew up in a very conservative household. "Never live above your means" was uttered on numerous occasions, and yes, dad, it stuck. 

An article came out by CNN last week...and I can assure you...this is NOT "fake news" ;) 

The study showed the majority of Americans don't have $500 in savings. So your new shoes, handbag, whatever it may be, wouldn't necessarily be coming out of your savings account, but it begs some questions. If you can't even pay your monthly credit card charges...how would you handle a $500 surprise bill?

​We all like to think we are healthy and everything is going to continue to go swimmingly in our lives, but the reality is that unforeseen circumstances can hit you like a ton of bricks and often bring a big price tag along with it.

41% said they have enough money to handle a $500 bill. 11% said they would turn to friends or family. 20% would put it on a credit card, and another 20% said they would curb their spending elsewhere.

But let's think about this. Say you have a big medical emergency. Don't worry, you say, I have insurance, it won't cost me anything...or will it? What is your deductible (the amount you have elected to pay before your insurance company steps in)?

​If you had to be taken in an ambulance to the E.R., most likely, you're going to have a large out-of-pocket cost, insurance or not. So to say you would put this $500 or whatever the charge may be on a credit card, might sound like the plausible idea. The issue stems from how much debt you already have outstanding on this card. 

Credit cards are assigned APR's (Annual Percentage Rates.) Let's say you already have a $1,000 outstanding balance on your CC from December and you add $500 on top. You decide there is no way you will be able to even make a dent in that this month because you already have racked up another $1,000 in spending for January. Therefore, this debt rolls over once again and now you are paying interest (your assigned APR) on your total balance of $1,500. 

Not to worry, Chrissy! You can stop while you're ahead!

We all want nice things but spending mad money when you don't have it can easily snowball. If you are carrying a $5,000 balance month-to-month at 23, who is to say at 33 that balance won't be $50,000...how do you plan on making a dent in that number?

The best plan: stop digging. (Side note: this is strictly towards "frivolous" purchases...the luxury items.) No one has the same situation and certain times are harder than others. Some inevitably have to go into debt to support their families...that is no easy choice and that is totally different than spending on unnecessary items. No matter your situation, there usually is a way to curb your spending, even just a little bit!

If you cut from your monthly spending, consider putting that amount in your savings account instead. You will be MAKING money via interest instead of owing it on your outstanding card balances. Trust me...you and your wallet will thank you in the long run!

http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings/
http://www.etonline.com/awards/goldenglobes/156153_chrissy_teigen_awkward_crying_face_becomes_a_viral_sensation_at_the_golden_globes/
https://twitter.com/erikajayne/status/806336031754625024
http://www.quickmeme.com/Show-me-the-money