INDIANAPOLIS — Buying clothes, booking a flight or grabbing tickets to a Colts game — all can now come with the option to “buy now, pay later.”
It sounds convenient, but if you’re not careful, financial experts say it can quickly lead to a credit crunch.
A recent survey by LegalShield found that three in four Americans are using buy now, pay later services.
“Honestly, I do like using it when I order online and I feel like I’m going to have to return stuff," Alex Cook said. "It’s like a cheat code you never pay the full price for what you order because I end up taking like half of it back anyways so it is nice for that."
Others said they use it for bigger purchases, like appliances, while some shoppers warn about the hidden dangers.
“If I kept using it, all the pay laters would add up,” said Alison Mascarenhas. “If I just buy it right then, then I'm like okay I spent that much money.
While some payment plans are interest-free, others carry fees or interest rates. According to the LegalShield survey, 49% of people miss at least one payment.
Missing payments can hurt your credit score — and buy now, pay later plans will soon be factored into FICO scores.
“It really is a matter of how we handle our own personal finances,” said Brad Clark, an investment adviser with Solomon Financial. “That purchase today is probably not going to make my life better to justify those payments over the next four months.”
Beyond late fees and interest, experts warn that debt can pile up and even lead to legal disputes. It could also affect things like insurance premiums and cell phone rates.
For those who use buy now, pay later, shoppers say the key is being informed.
“Check the interest rate, check what’s left, and make sure you’re not outside of your means,” said Dan Arndt. “That’s what’s gonna kill you.”
