Buy Now, Pay Later is becoming an increasingly popular way to borrow, especially as many consumers look for ways to stretch their budgets. These plans may seem more convenient than traditional credit, but they can also make it easier to take on payments that may be harder to afford later. And with holiday spending picking up, Consumer Reports says it’s important to understand the risks before signing up.
With household budgets under pressure, more consumers are turning to Buy Now, Pay Later. According to the Federal Reserve, about one in six adults used these loans in the past year. People like Buy Now, Pay later, because it allows a purchase to be split up into smaller payments without having their credit score checked.
And it’s no longer just for online retailers. Consumers are using Buy Now, Pay Later loans for groceries, food delivery – even utility bills and rent. The big concern is while these loans may help you cover something today, the payments are coming out of future paychecks. And if you have several of these plans running at the same time, payments quickly add up.
When those payments are due, if there is not enough money in your bank account, that could lead to missed payments or overdraft fees. That’s why Consumer Reports recommends, before choosing a Buy Now, Pay Later loan looking at the full cost – not just what’s due today. And make sure that every payment actually fits your budget.That’s because some of the Buy Now, Pay Later Loans may charge interest and additional loan fees.
For larger purchases, Consumer Reports recommends comparing your options first including a credit card or a loan from your bank or credit union to see which gives you the best combination of cost and consumer protections.
And for all Buy Now, Pay Later purchases, keep track of due dates, stacking multiple loans, and automatic payments that could overdraw your account.
Consumer reports says protections and policies with Buy Now, Pay Later can vary depending on the lender. Credit cards, by comparison, come with longstanding federal protections for things like billing disputes or even returns.
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