Roughly 30% back-to-school shoppers report going into debt over back-to-school shopping; is buy now, pay later the solution?

Over the past few years, American consumers have been grappling with the impact of inflation on their wallets. With back-to-school season officially underway, basic classroom necessities have also fallen victim to higher costs over the past few years.

Tools and apps like buy now, pay later have increased in popularity over the past few years to help cope with higher living costs, but most experts agree that the tool shouldn’t be used as a first-resort option this school season.

Key back-to-school cost stats

Shoppers still feel the strain of elevated prices despite decreasing inflation

According to Bankrate’s Back to School Survey, the cost of school shopping has reportedly caused less financial strain on consumer wallets this year. The survey found 32 percent of back-to-school shoppers changed/will change their shopping habits due to inflation, down from 41 percent in 2022. However, this doesn’t mean that consumers have stopped feeling the strain of high prices.

“Broadly, inflation has been coming down, but many prices remain elevated,” says Mark Hamrick, Bankrate senior analyst and Washington Bureau Chief. The Consumer Price Index details that from August 2022 to August 2023, the cost of education books and supplies decreased by 3.4 percent on average overall. That doesn’t mean costs have returned to preinflation levels.

Amy Sims is an editorial director at Bankrate — and a mother of two who’s a seasoned veteran when it comes to back-to-school season. When asked if she’s noticed the cost of supplies rising in recent years, her answer was a resounding yes.

“This year, I spent about $150 just on school supplies for one child in middle school,” Sims says. “That amount also doesn’t include items we could reuse, like headphones, or other expenses.”

For families sending their kids off to school this year, these expenses have the potential to take a big bite out of the monthly budget — especially families with more than one child. In fact, 31 percent of back-to-school shoppers estimate that they will go into debt from back-to-school shopping as a result of inflation. This includes 13 percent who are using/plan to use buy now, pay later services to help cope with the costs.

“Shopping for school supplies has always been a challenge because you need to find these very specific items to meet the list criteria,” Sims says. “But now I’ve started to dread it more because it has been both challenging and expensive the past few years.”

Is BNPL a good idea for back-to-school shopping?

Buy now, pay later (BNPL) apps and loans have quickly become one of America’s to-go financing options. According to Bankrate’s Buy Now Pay Later Survey, over a third of Americans (39 percent) have used at least one BNPL service at checkout.

Aaliyah Kissick, personal finance expert and CEO at Financial Literacy Diaries, says that while BNPL is never an “ideal” solution for back-to-school shopping, it is an option for shoppers in a pinch. However, Kissick advises avoiding BNPL products if interest is charged. “Consider using your credit card if you know you can have the money to pay it off before your next statement balance or [if] the interest rate associated with your credit card is lower,” Kissick says.

Echoing Kissick’s sentiments, Hamrick asserts that there are better options out there when it comes to affording the annual back-to-school haul. “While Buy Now Pay Later options appear to be growing in availability, a far better strategy is to budget and save ahead of time for this annual rite of passage of back to school shopping,” Hamrick says.

“My concern is that if a household hasn’t budgeted or saved for school related purchases, there’s a risk that installment payments have also not been planned, causing further strain, particularly as interest charges mount,” Hamrick adds.

Like every other financial tool, whether you should use a BNPL product to finance school supplies depends on a few factors:

• If interest is charged

  Most BNPL products don’t require a credit check to get approved and don’t charge interest if you miss a payment. However, there are a few companies, like Affirm, that tack on sky-high interest rates. Most of the time these are much higher than credit card or personal loan rates.
  
  Investigate the terms and conditions before checking out. Specifically look for interest or fees charged. If the company lists an interest rate, check if the retailer offers other BNPL products or use your credit card if the rate is lower.

• What you need and how much it costs

  Most companies have restrictions on what you can use a BNPL product on. For example, some have specific brand partnerships and don’t cover competitor products, while others are geared toward financing specific categories of items.
  
  Plus, some BNPL companies have minimum and maximum limits on how much you can finance. If you’re looking to purchase a big-ticket item, like a new laptop, make sure the item is approved and falls within the company’s limits.
  
  Outside of company limits, you should also make sure you can afford the four installments. If you have a high credit score you may be able to get a low excellent credit personal loan rate and have longer to pay it off.

• Potential discounts

  Specific retailers may offer a discount if you use a BNPL plan to finance your purchase. This isn’t a universal benefit, but some companies may offer a percentage off of your overall cost if used for an approved purchase.
  
  If there is no interest rate charged, a hard credit check isn’t required, a discount is provided and the installment payments fall within your budget, a BNPL service may be the best financing option for your school purchases.

When to use BNPL to finance back-to-school costs

Individuals who have minimal expenses and the funds necessary to make the full payments on time may benefit from using a BNPL plan.

In certain circumstances, using a BNPL tool — or similar financing option — can be a smart money-move for individuals who need to break up their back-to-school shopping costs.

• Your expenses have to be made through an online shop or store that incentivizes BNPL usage.
• You aren’t confident in your ability to afford the entire balance at once, but you can make the payments once broken up in a few installments.
• Inflation and rising rates have impacted both the cost of the items you need and your credit card rates.
• You don’t want to use more of your available credit on a minor expense that you can afford with a BNPL tool or app.

When not to use BNPL to finance back-to-school costs

Those who have already accumulated large amounts of high-interest debt, especially BNPL debt should not use BNPL for back-to-school costs.

Due to the potential risk factor associated with using a buy now, pay later product, you may want to steer clear of similar payment options if you resonate with any of the following scenarios:

• You have the funds saved up specifically for the purchase and can afford the cost without financing.
• You already have multiple BNPL loans taken out and are having a difficult time managing the balances.
• The purchase you’re expensing is large and the monthly payments don’t comfortably fit into your monthly budget.
• You could make the payment on your credit card and gain rewards or points from the purchase.

How to reduce back-to-school costs

If you’re like 46 percent of back-to-school shoppers, you’re likely looking for ways to save money this school season. Thankfully, most gearing up for the school year can access free —  or heavily discounted supplies —  within their own community.

1. Look into local need-based programs and charities

When reducing your school costs, start with a local charity or nonprofit organization. Although not all do this, many organizations host community-wide donation events for the back-to-school season. Call your local community outreach center or conduct a quick internet search to see if any organizations in your area offer donations.

Most commonly donated items include backpacks, writing utensils and other basic classroom necessities. However, some also include food and clothing drives, although the clothing may be geared toward younger students and children, rather than adult learners.

If the school has a uniform requirement there are organizations that partner with schools to put on uniform drives. Often set up like a shop or store, these drives are put on a few weeks before the school year starts and are free of charge or extremely discounted. To see if there are any similar programs in your area, call the school or the local community assistance center for options.

2. Contact the school for supplies or waivers

Even though K-12 public education in the States is free, there are still costs associated with learning. For example, most schools have fees and costs that come up during the year, depending on the student’s grade.

Parents and caregivers could be on the hook for a number of fees including meal costs, school-led extracurricular activities and class field trips or outside programs. Most school districts will waive these costs for families who qualify for larger programs, like free or reduced lunch or through internal scholarships and similar school-provided assistance programs.

American public schools usually don’t provide waivers for supplies, as the teachers are mainly responsible for stocking their classroom with the essentials. Some schools may offer free supplies, so it never hurts to call the front office and ask before the year officially starts.

3. Look at discount sites and warehouse stores

Discount and dollar stores often sell the basic school supplies that are on the classroom list. Shopping at an alternative realtor versus a big-box store can save you thousands of dollars. When it comes to college, textbooks and technology purchases can be a bulk of the expenses. To help combat some of these costs, there are online retailers and physical stores that sell used course material and necessary technology.

Make sure to go to a shop that specifically caters to the students at your university. These stops are more likely to have the materials you need for your courses. You can also visit national online stores to help cut the cost of textbooks or course material. Websites like thriftbooks and Facebook Marketplace are great ways to find used and discounted books.

How to pay for back-to-school shopping without buy now, pay later

Consider the following options to help make back-to-school shopping a bit easier on your bank account:

• 0 percent APR credit card: Some credit cards offer introductory 0 interest periods that typically last 12 to 21 months. It’s best to pay down the entire balance before the introductory period ends to get the most value out of the card.
• Secured credit card: If you don’t qualify for a normal credit card or other financing option, a secured card may be your best bet. Like a secured loan, the lender caters to those with low credit, but you’ll need to secure the balance with some form of collateral — typically a down payment — to get approved.
• Cash advance app: A cash advance allows you to get a portion of your paycheck before your pay date. You’ll need to pay back the balance by your next pay day, so only use this option if you can repay the balance in a timely manner.
• Small loans: Small loans are need-based loans offered by select credit unions and banks as an alternative to high-interest payday loans. They’re a low-cost, government-monitored financing method that have maximums around $1,500.