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‘The Big Money Show’ co-hosts discuss buy now, pay later spending options and the impact it will now have on your credit score.
Using “buy now, pay later” (BNPL) has become increasingly common in recent years as people look to split up and finance purchases they make.
According to Credit Sesame financial analyst Richard Barrington, some key steps people should take as they utilize BNPL include budgeting beforehand, reviewing the terms of the plan, determining what fees could be associated and being prepared for automatic payments.
“If you need BNPL to be able to pay for something, you have to question how you’re going to come up with the money to make the BNPL payments when they come due,” he said, noting budgeting ahead of time can help someone figure out if they can foot the bill for what they’re buying and any debt they could build up because of it.
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He recommended reviewing what income will come in “over the term of the BNPL payments” and then subtracting “all the essential expenses you’ll have during that time” to help “see if you’ll have enough left over to cover BNPL payments.”
“If not, you risk missing one of those BNPL payments and incurring late fees,” he said.
Budgeting beforehand can “also help you avoid not being able to afford one of those essential expenses because you committed too much money” to BNPL, according to Barrington.
The Credit Sesame financial analyst urged people taking out BNPL loans to take a close look at the terms of the plan they’re signing up for.
“Know how much you have to pay and when,” Barrington said. “Also pay attention to what happens if you don’t make a payment on time.”
Knowing the timing and size of the BNPL payments can help avoid incurring a late fee, he said.
BNPL late fees averaged $7 for a loan taken out on a $135 purchase, according to the Federal Reserve Bank of Richmond.
Barrington advised “avoid signing a BNPL agreement you can’t take home and read first.”
“Many BNPL arrangements are made at the point of sale, like in a store. That means you’re trying to understand the terms while you’re in a hurry and with lots of distractions around,” he said. “Instead, take the agreement home with you to read, and then come back to the store to make the purchase. If it doesn’t seem worth that effort, perhaps you don’t really need to buy the item.”
Members of the public pass by a floor advertisement for tech firm Klarna, a European ecommerce company which allows users to buy now, pay later, or pay in installments. (Daniel Harvey Gonzalez/In Pictures via Getty Images / Getty Images)
BNPL can have “strict payment terms” that can lead to late fees, so it’s important to know what the costs associated with the plans could look like, according to Barrington.
“These fees may look like they’re fairly low dollar amounts, but since BNPL purchases are generally for relatively low-priced items, they can represent a large percentage of the purchase price,” he explained.
Some ways people can steer clear of late fees from BNPL include budgeting and knowing the terms of the installment plan they’re using.
On top of that, he said, creating calendar reminders or using automatic payment options can be helpful.
When it came to automatic BNPL payments, Barrington noted people should “pay close attention to the amount and schedule” because “otherwise you may find yourself hit with an overdraft fee if your bank account doesn’t have sufficient funds to cover the payments.”
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Some BNPL services make enrollment in automatic payments mandatory, he said.
However, people should not take out more than one out at a time, according to Barrington.
“People often turn to BNPL loans when they’re having trouble making ends meet,” he said. “That’s not going to get any easier if they take on multiple BNPL obligations that they’re going to have to come up with the money for in the months to come.”
Some retail experts and financial lending providers are saying buy now, pay later programs are the new layaway. (iStock / iStock)
He said to “avoid using BNPL for anything whose useful life lasts less time than it will take you to finish paying off the BNPL loan.”
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Another tip that Barrington had was to look into secured credit cards or “becoming an authorized user on someone else’s card” instead of BNPL.
“Secured credit cards or having someone sign you on as an authorized user of their card can be a way in for people who don’t have good enough credit to qualify for a card on their own,” he said.
Credit requirements can differ from card to card. Americans had FICO Scores of 715 on average last year, according to Experian.
Customers look at BYD electric cars at an auto show in Yantai, in eastern China’s Shandong province on April 10, 2025.
Stringer | Afp | Getty Images
BEIJING — Competition in China’s electric car market just got fiercer with consequences for the domestic economy and even the global auto market.
Industry giant BYD last week announced a slew of discounts — some of nearly 30% or more — across several of its lower-end battery-only and hybrid models. The budget-friendly Seagull compact car saw its price drop to 55,800 yuan ($7,750).
Other major Chinese automakers have begun following suit.
“BYD’s action this time has made the industry rather nervous,” Zhong Shi, an analyst with the China Automobile Dealers Association, said in Mandarin, translated by CNBC.
“The industry is in [a state of] relatively large shock,” he said, noting smaller automakers are now more worried about their ability to compete.
The industry has been a rare bright spot in an economy that has been seeing slower growth and lackluster consumer demand. Part of Beijing’s latest attempt to spur consumption included subsidies for new energy vehicles, a category that includes battery-only and hybrid-powered cars.
“The latest car price competition underscores how supply-demand imbalance continues to fuel deflation,” Morgan Stanley’s Chief China Economist Robin Xing said in a report Wednesday.
“There is growing rhetoric about the need for rebalancing [to more consumption], but recent developments suggest the old supply-driven model remains intact,” he said. “Thus, reflation is likely to remain elusive.”
China’s electric car market has already been in a price war for the last two years, partly fueled by Tesla.
But this time, traditional automakers, including state-owned ones, are feeling significant heat as the share of new energy vehicles has come to account for about half of new passenger cars sold in China.
Last week, Great Wall Motors Chairman Wei Jianjun warned of an “Evergrande” in China’s auto industry that had yet to explode, comparing the fast-growing EV industry to the country’s bloated real estate sector. The outspoken private sector autos executive was speaking to Chinese media outlet Sina in an interview posted on May 23.
Once China’s real estate giant, Evergrande defaulted on its debt in late 2021 as the property market slumped after Beijing cracked down on the company’s high debt levels. Demand for homes also fell following tighter government regulations, leaving the developer struggling to finance the remaining construction of pre-sold units.
As Chinese media scrutiny on automakers’ financial situation rose, BYD on Wednesday refuted reports that it excessively pressured one of its dealers on cash flow. The dealer, Jinan Qiansheng in the eastern province of Shandong, did not immediately respond to a CNBC request for comment. BYD referred CNBC to its statement to Chinese media.
In the early years of China’s state-supported efforts to become a global leader in the emerging electric vehicle industry, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million). The high-level policy encouraged a flood of startups, of which only a handful survived.
A 19% price drop over two years
In China, the average car retail price has fallen by around 19% over the past two years to around 165,000 yuan ($22,900), according to a Nomura report this week, citing industry data from Autohome Research Institute.
Price cuts were far steeper for hybrid or range-extension vehicles, at 27% over the last two years, while battery-only cars saw prices slashed by 21%, the report said. It noted that traditional fuel-powered cars saw a below-average 18% price cut.
In contrast, the average price of a new car in the U.S. was $48,699 in April, up nearly 1% from two years earlier, according to CNBC calculations of data from Cox Automotive. The average electric car price last month was an even higher $59,255.
BYD’s latest round of price cuts didn’t include the company’s higher-end models priced around 200,000 yuan, such as its flagship Han electric sedan. Reuters pointed out the newest model of the Han released in February was about 10% cheaper than its previous version, according to its calculations.
The Chinese auto giant, which was backed by Warren Buffett in its early years, has rapidly captured market share in China with its wide range of cars at various price points. The company reported a net profit increase of 49% to 14.17 billion yuan last year. Total current liabilities rose by more than 60% to 57.15 billion yuan. Cash and cash equivalents fell slightly to 102.26 billion yuan.
Price war to continue
Rather than reflecting market expansion, double-digit growth of new energy vehicles sales in China is just eating into internal combustion engine cars’ slice of the pie, Ying Wang, Fitch managing director, APAC Corporate ratings, told reporters Tuesday. She noted how the country’s auto market hasn’t grown much since 2018, and expects autos retail sales to only increase by low single digits this year.
Automakers will keep on using price cuts to gain market share in China this year, she said. Wang pointed out another option is for companies to include more features, such as advanced driver-assist systems, for free instead of asking consumers to pay more for them as an add-on.
Geely-backed Zeekr in March said it was releasing its advanced driver-assist system for free, while Tesla has attempted to charge its customers for a similar feature. A month earlier, BYD announced it was rolling out driver-assist capabilities to more than 20 of its car models.
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In the last several months, China’s top leaders have increasingly called for efforts to address non-productive business competition, known as “involution.” The term was mentioned in the premier’s annual work report in March and in the market regulator’s meeting last week which called for “comprehensively rectifying ‘involutionary’ competition.”
However, the massive effort to produce lower-cost electric cars in China, and the automakers’ subsequent move to expand into other markets, has increased worries about the impact on other countries’ auto industries.
The European Union slapped tariffs on imports of China-made electric cars after probing the companies over the use of government subsidies in their manufacture. The U.S. also imposed duties of 100% on China-made electric cars, quashing hopes that the vehicles might enter the world’s second-largest auto market.
But in the EU, tariffs have had limited effect. In April, BYD outsold Tesla in Europe for the first time, according to JATO Dynamics. Tesla’s Europe sales plunged by 49% that month, according to the European Automobile Manufacturers’ Association.
— CNBC’s Bernice Ooi contributed to this report
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