Starting Your Holiday Shopping Early? Here's One Payment Option to Avoid at All Costs

Although it's only the start of November, you may be deep in the throes of holiday shopping already. And that's not a bad thing.

The sooner you begin your holiday shopping, the more time you'll have to research prices at different retailers and, ideally, walk away with the best deals. Plus, if there are people on your shopping list who want very specific things, getting a jumpstart could mean not having to scramble at the last minute -- or disappoint the folks you love.

As you go about your shopping, you may be offered the option at different retailers to pay for your purchases using a "buy now, pay later," or BNPL plan. That may seem like a better alternative to swiping a credit card.

But you'll need to be very careful when going this route. And you may want to think about steering clear of BNPL plans altogether.

The danger of BNPL plans

An estimated 20% of Americans plan to use BNPL plans to purchase gifts during the holidays this year, according to Adobe Analytics as reported by USA Today. But while BNPL plans might seem like a convenient option for making purchases, they could also end up harming you financially.

For one thing, it's pretty easy to qualify for a BNPL plan. Usually, you pay a portion of your purchase upfront and then agree to repay the rest in installments over a period of 12 weeks or less. The problem, though, is that BNPL plans might drive you to make purchases you truly can't afford.

It's one thing to say no to a given purchase because you're coming close to reaching your credit card limit, or you're unable to qualify for an additional line of credit by opening a new credit card. A BNPL plan might tempt you to buy something you really can't swing by making that purchase possible in the absence of other avenues or having the cash on hand.

Also, it's easy to see why you may be tempted to use a BNPL plan even if you haven't come close to reaching your credit card limit. When you charge expenses on a credit card, you're charged interest automatically when you don't pay your balance in full, the exception being if you have a 0% interest rate for a limited period. With a BNPL plan, there's no interest at stake if you make your installment payments on schedule.

But if you don't make those payments on time, you most likely will face costly penalties and interest. Plus, you'll risk having your credit score take a hit, the same way you would if you were to fail to pay the minimum balance due on one of your credit cards.

It may be best to say no to BNPL plans

It's easy to see why you may want to sign up for a BNPL plan as you're doing your holiday shopping. But that's a move you might regret.

The upside of starting your shopping early is that you have time to pivot if you realize you can't swing many of the items on your list. So rather than subject yourself to added debt, make adjustments to your spending plans if money ends up being tighter than expected, or if tackling your gift list in full proves to be too costly. You're better off buying less expensive items, or cutting items from your list, than closing out the holiday season with a pile of debt and a massive hit to your credit score.