3 traps to avoid when you go shopping

Many of us are enticed by the loud advertisements on shopping events, especially when it comes to the last few months of the year – think 10.10 Sale, 11.11 Sale, Black Friday & Cyber Monday.

There just seems to be so many bargains to be scored! But are there, really?

Giving the appearance of affordability–instalment plans and Buy Now, Pay Later

Instalment payment plans or Buy Now, Pay Later options may make pricier options appear affordable by spreading out payments. Instead of paying $1,200 now for a mobile phone, paying $400 each time over three instalments is more appealing for many – except perhaps we could have only afforded a $600 mobile phone with our budget.

To be fair, instalments are not bad. In fact, most of us would need to pay by instalments at some point in our lives, such as for our home.

The key is to keep your purchases to what you can afford because instalment plans are loans and do not reduce the cost of your purchases. It may be an “interest-free” way to make that unexpected purchase but if you miss any payment, there will be late fees or charges (making the purchase even more expensive).

Unless you are certain you can and will repay on schedule, it is better to avoid relying on them, especially since you may have the tendency to splurge. Before you know it, you may have overstretched your finances by chalking up instalments for multiple purchases.

A 2020 survey in Singapore showed that 27% of respondents admitted to being financially worse off when using “Buy Now, Pay Later” schemes. Impulse buying was the most common mistake cited, followed by buying an item that was more expensive than they would otherwise have. Some respondents said that as a result, they struggled to pay for other expenses.

The rule of thumb for shopping is to take time to ask yourself these few questions:

• Do I need the item or do I want it?

• Am I willing and able to pay for it at one go instead of opting for instalments?

• What is the true cost of paying by instalments? How likely will I be able to make timely repayment of these instalments? Do I end up paying a higher price (e.g. additional costs if I miss payment)?

Usually, leaving the store or website and waiting for three days before making a purchase will give you clear answers.

Preying on the fear of missing out (FOMO)

With online shopping, the temptation to splurge has become a daily struggle for many.

E-commerce platforms feature flash sales or daily deals, coupled with the notice that “3 customers are looking at this item now” or “Only 4 units left”.

When we are acting under time pressure, the FOMO on what is presented to us as a scarce steal overshadows all else.

One quick way to avoid landing in a position to act in haste is to not use your main e-mail address for your shopping accounts. Instead, set up an e-mail address purely for marketing materials and do not link this account to your e-mail app. That way, you will not see what “special deals” there are on the various e-commerce platforms you are on. As the saying goes - "Out of sight, out of mind!".

Ideally, take time to do your research when you have your eye on something. Compare prices across retailers. Better yet, monitor prices over a period of time. You may find that the large-scale shopping events may present negligible savings.

It is also no secret that retailers monitor your browsing activity and use it to their advantage by pushing similar or complementary products your way. Ditch your shopping apps and turn on the private or incognito feature on your browser when you next shop online to cut out temptations!

Counting on penny-wise behaviour

Ever wondered why there are usually three sizes of popcorn, iced latte or fries?

Merchants are not being thoughtful about differing appetites. The medium size option has been offered as a decoy, such that the large size, usually just a wee bit more expensive, appears to be of great value for money.

The lure of free shipping with a minimum purchase or purchase-with-purchase deals uses the same trick. In order to score a freebie or a discount, we have all searched high and low for extra items (usually things that we never needed) to add to our shopping cart. Such unnecessary extra items may even end up costing more than the freebie or discount that you can gain.

Making a shopping list could help you stay away from the distractions that merchants shove in your face. Alternatively, make it a point to compile a list of items instead of going shopping as and when you need something.

A small adjustment you could make to your online shopping routine is to carefully go through your shopping cart. Are you sure you want to buy all the items? Are there hidden charges?

The bottom line

Knowing how retailers go all out to persuade you to part with more money is bagging a deal in itself. After all, that money you did not spend because you saw through their tricks can be put to better use, such as saving or investing.

BNPL Code Trustmark

If you find yourself needing to use a BNPL service, choose one that prioritises consumer protection and responsible lending. Look for BNPL providers that have the BNPL Code

Trustmark – which indicates that the provider complies with the BNPL Code. The BNPL Code is designed to keep consumers safe and reduce their risk of getting into too much debt. Accredited BNPL providers have committed to implementing safeguards such as not charging compound interest on late payments, fair and clear disclosures, suspension of account upon default, voluntary exclusions, and financial hardship assistance.

You can find more information about the BNPL Code on the Singapore FinTech Association's website here.

Opting for BNPL providers with the Trustmark can be a helpful step but the key to avoiding debt and maintaining financial health is to spend within your means and be fully aware of your repayment capabilities.