Rossen Reports: Here’s how to avoid 'Buy Now, Pay Later' problems
Buy Now, Pay Later is booming, but new information shows that the payment tactic isn't all it's cracked up to be.
So who's using it and what risks is it causing? Here's a look at some easy ways to avoid making a huge mistake that could put you in a major financial bind.
Risk 1: It can hurt your credit
Here's what you may not know when you’re signing up for this. When you make an on-time payment, it may not necessarily be reported to the credit agencies like your credit card does.
One recent study shows, already, 42% of us have already made a late payment and that means credit is being hurt all across the country. How do you stop this? Put your bills for Buy Now, Pay Later on autopay so you don't forget and hurt your credit score
Risk 2: Buy Now, Pay Later encourages overspending
About 70% of people admit to spending more with Buy Now Pay Later than they would if they had to pay upfront.
So how can you avoid overspending?
Buy Now, Pay Later is merely a tool you can use to keep cash flow going in your house. It's the same way you take a loan on anything, but you can still afford it. Don't buy anything you can't afford. Experts say you should only have one or two of these loans open at a single time so it's easier to keep track.
Risk 3: You can get charged for deferred interest
You think you're making payments interest-free, but it could only be for a certain period of time. So if you don't pay off the balance by the deadline, you'll get an interest charge.
How do you avoid it? Look for language like "no interest if paid in full within six months" and mark on your calendar when the loan should be paid in FULL.
Risk 4: Buy Now, Pay Later doesn't have the same protections as credit cards
If there's a problem with the quality or there's a billing error, your credit card company can't help.
If you really want to do Buy Now, Pay Later, before you go to a third-party agency, look at your own credit card. A lot of them are offering the same type of plan.
For example, American Express has Plan It, CitiBank has Flex Pay and Chase has the MyChase Plan. Before you go out and sign up for Buy Now Pay Later, stay inside the ecosystem with your credit card. They may be able to give you more protection than Buy Now, Pay Later.
Overall, Buy Now, Pay Later could be the right choice for you. So, if you're debating it, ask yourself two things: First, is using Buy Now, Pay Later the only way you can afford it? And second, are you certain you can and will make those payments on time?