Should you Buy Now, Pay Later?

Buy now, pay later services are beginning to proliferate in online shopping.  Even mega-retailer Walmart has boarded the buy now, pay later bus, announcing they are eliminating lay-away.  The service seems simple enough, allowing the consumer to split the cost of their items into set payments.  The advertising promises no interest if the program is met.  

But is it that simple?  

Can you really afford it, if you can’t just buy it outright?: For years the American consumer has been conditioned to look at “payments” as the measure of whether they can afford an item.  We’ve moved from buying items outright, to making credit card payments, car payments, etc..  This focus has left the average American unaware of the true costs of items–as they pay over time and can ignore the big picture. Buy now, pay later moves this payment mentality even further, instead of a major purchase, like a vehicle, you can now make payments over time on a pair of jeans.

Buy Now, Pay Later and Your Credit: Consumer advocate Clark Howard has a warning about how buy now, pay later may impact our credit score. “Already, one in three people who’ve had access to these payment plans have gone delinquent,” Clark says. “Three quarters of them have already damaged their credit.”  Clark Howard has warning about popular pay-later programs – 104.5 WOKV

Here’s some tips as you think about these decisions: 

  • Beware the payment mentality.  Are you spending more money now, because you can pay it over time?  If this is something that you can afford now, and is it the right price for your spending plan/budget?  
  • Watch out for impulse purchases: Do you find that you make purchases you later regret?  Buy now, pay later may be particularly tempting for impulse purchases by reducing the friction involved in making the purchase–ie instead of having to pay the full amount, you get to put it off until a later point and pay in smaller chunks.  Less friction means you’re more likely to make an impulse purchase.  
  • Read the Fine Print: If you use a buy now, pay later option, do you still have the same return and refund rights on the purchase or do you forego those?  What happens if you use buy now, pay later and the item arrives damaged or is the wrong size? Ensure you’re aware of how the payment method impacts returns and refunds.  In what circumstances will fees or interest be applied and at what rates? What happens if you’re late or miss a payment? How might your credit be impacted?

Wondering how to develop a spending plan to meet your financial needs and move away from a payment mentality?  Check out our accredited financial counselors Meet Us (You’ll be glad you did.) and schedule a free introductory call Contact Us Today (Really, there’s not a better time.)

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