A new Bankrate survey showed about four in 10 Americans have now tried buy now, pay later financing options for purchases.
But more than half of users have had issues with this option, such as overspending, missing due dates or having problems with returns and other merchant disputes.
Ted Rossman with Bankrate said one of the reasons people go to buy now, pay later is they hear it’s four interest free payments over 6 weeks. But he wanted to make two big points about this financing option.
“One is consider the total cost of ownership,” Rossman said. “It’s not just $50 dollars here and $50 dollars there. Don’t worry about the installments, you need to think about the total cost you’re spending.”
He urged caution and advised consumers to not trick themselves into overdoing it
The second thing to know is that there can be a lot of fine print and not every offer is the same.
“Sometimes it’s four interest free payments over six weeks. Sometimes it’s a lot longer, and sometimes there can be a hefty interest rate,” Rossman noted. “I mean, a company like Affirm could be zero percent, could be all the way up to 36%. That’s a massive range and we see that across the industry.”
Rossman said the longer term buy now, pay later plans are starting to charge interest rates that are very credit card like. So, it may not always be the gentler alternative that people are looking for.
He said the best way to use buy now, pay later is to use it for a single purchase, then pay it off. He recommended to not keep piling up buy now, pay later deals on top of each other where it is hard to keep track of what is owed.
