Buy now, pay later pitfalls; things to consider while holiday shopping

RENO, Nev. (KOLO) - ‘Tis the season for holiday shopping and financial experts with Greater Nevada Credit Union are advising shoppers to read the fine print before signing up for those appealing shop now, pay later options.

Options like Afterpay, Klarna, and Affirm - to name a few - can be helpful tools, but if you don’t take the time to read the terms and conditions you can end up with even greater financial burdens.

“Easy does not always mean that it’s not impactful to your credit score or overall credit history. So, you want to make sure you’re not doing something impulsive in the moment because it makes that big purchase very attainable, but really you don’t have a plan on how you’re going to pay it back,” said Michael Thomas, Sr. Vice President at GNCU.

Thomas says that because the buy now, pay later option is a fairly new industry, there is no real standardization amongst providers. So as the buyer, it is critical to make sure you know exactly what you’re signing up for.

“You have to make sure... is it biweekly payments? Is it monthly payments? Look at the installments and make sure you know when that payment is due. There was a study done as these are becoming more and more popular; about half of all people who tried one of these buy now pay later loans ended up missing or making a late payment and they encounter high fees or interest rates they didn’t expect,” said Thomas.

Another potential impact could be reflected on your credit score. So, as you may be still crossing those names off your holiday gift list make sure to know exactly what you’re getting into when you are agreeing to buy now, pay later.

“It looks really easy, it’s just one click to make the purchase, but it can take a long time to unravel a bad financial decision that you make in the moment.”

Copyright 2022 KOLO. All rights reserved.