Are you gearing up for the holiday shopping season? Retailers sure are, and they’re offering consumers all kinds of options of pay, besides credit cards.
One of those payment options is buy now, pay later.
“They’ve been around a long time. They started out as a way that retailers could make expensive purchases seem easier to afford,” said Kevin Brasler, executive editor of Washington’s Consumer Checkbook.
The ads are everywhere, Brasler said, allowing consumers to buy just about anything from shoes to appliances to vacations and even burritos with these payment options.
“Many ‘buy now, pay later’ plans advertise that they don’t charge interest,” Brasler said. “Some do, though, and so it seems like a simple payment arrangement.”
While major retailers are pushing these third-party financing companies for consumers to pay for purchases over time, they could end up hurting consumers.
“For many consumers they’ve become big debt traps.” Brasler said.
That’s because if consumers don’t pay on time, it could turn into a high-cost loan. Brasler said the interests rates will continue to go higher.
“To most consumers, they seem like a more responsible way to pay for things … instead of adding debt to their credit cards,” Brasler said.
If you don’t have enough money in your checking account to cover the automatic withdrawals, it can cost you fees and could damage your credit, according to experts.
They also recommend that consumers always read the fine print before signing up.