The other day, as I was going through Buy Now, Pay Later (BNPL) options for my client, I came across a platform called Split. I email them to find them for further inquiry, only to be informed that the platform has been switched from a BNPL model to a Save Now, Buy Later (SNBL) app called Sugar.
SNBL is an intriguing concept to me; after being taught to save money so that I could buy what I wanted since I was a child, it wasn’t until I was a young adult that the concept of installment loans was introduced to me.
While BNPL or credit card debt allow users to make purchases and pay for them later, often with interest or fees, they also have potential drawbacks that users should be aware of. Since the SNPL app is fairly new, this article aims to provide a comprehensive guide to the concept of SNBL, its advantages and disadvantages, and a conclusion on whether they are a good option for consumers.
This guide will be based on the Sugar app, but is not sponsored by them and our opinion is not affected by them or any party.
Save Now Buy Later’s Concept:
Save now, Bay Later apps are financial tools that allow users to set a goal to purchase an item in the future, save up until the savings reach the goal, and finally purchase the item. This is akin to a “reversed installment” where the installment is paid towards a saving, rather than paid afterward for a debt.
With the Sugar app, they help users create a payment plan unique to them, choosing when to save money into the account and when to pay for the item. They also further reward the customer with potential cash back once they hit their target, encouraging users to stay on track.
- Microfinancial planning: with apps like Sugar, users are basically doing financial planning at the microlevel. By setting a single goal and committing to it, the user has planned their finances to work within their income.
- Debt-free: Compared to credit card or BNPL options, SNPL is debt-free because the financial institution involved does not give out any form of loan to the user. Instead, what they provide is planning and guidance. Hence, there will not be any form of debt or interest incurred by the user.
- Credit score protection: Missed payments and overuse of credit damage credit scores. Bad credit makes loans and credit cards harder to get. It can also increase interest rates on loans, accommodations, and major purchases involving financial institutions. No debt means no payment deferment, late payment, or penalty with SNBL.
- Impulsive Buying: We all regret impulse purchases. I have a cabinet full of vintage lenses I regret buying, either because I already owned something comparable similar or because they just don’t suit me. In that instance, SNBL allows people to take their time and decide if the purchase is right for them.
The Sugar app refunds 100% of a user’s purchase if they change their mind, potentially to encourage user to research on their purchase and given them the flexibility to deal with unforeseen circumstances.
- Miss-opportunity: Saving up for something takes time, and time is one of the most important factors in obtaining certain items. For example, one cannot expect to spend 5–10 months saving up for limited edition sneakers and expect them to still be available for purchase later.
Also, by putting money aside for a planned purchase, users may have missed out on other financial opportunities like investing, paying off debt, and others.
- Inflation risk: Using the previously mentioned limited edition sneakers as an example, if we missed out on purchasing them, we might look for aftermarket goods. We could be lucky and get the item for a reasonable price, but we could also get it for a scalper’s price. which is more often than not significantly higher than the original price, hence the inflation risk.
Save Now, Pay Later app can be very beneficial for us, especially because it facilitates a healthy spending habit by enforcing spending what one can afford. Yes, it might have some downsides, but it is worth considering before going into debt.
We realised that by using the Sugar app, we gave ourselves more time to think about the purchases we were making and, as a result, made more correct purchase decisions. With wiser financial decisions, now the only thing I need to worry about is what I’m going to do with that collection of vintage lenses.
Sugar by Split is available on Apple and Android, check out the links below to download the app.