Buy Now, Pay Later: 3 Questions to Ask Yourself First

Buy Now, Pay Later offers are everywhere, whether you’re buying a pair of jeans, electronics, or even just some needed groceries. 

Their message always seems fairly simple: Don’t pay for 100% of this item today. Instead, spread out the payments over time in four easy installments (or something similar).

But it’s not that simple.

Here’s 3 questions to ask yourself before using the Buy Now, Pay Later option:

1) Ask Yourself: Am I using Buy Now, Pay Later because I can’t afford to pay for this item upfront?

Caution: Remember, these Buy Now, Pay Later plans are loans or debt in another form. They allow you to receive an item before it’s fully paid for, so you still owe on the item. Using Buy Now, Pay Later, you’re committing future money you’ll earn to pay for this past purchase – the same as using a credit card or financing on a loan. This reduces how much future money you’ll have to spend on your future needs, which can lead to a cycle of debt.

2) Ask Yourself: Does Buy Now, Pay Later encourage me to spend more than I would if I was paying cash for this item?

Caution: People often spend more than they intended when using a debt payment system because there are few limits built into these payments. The “friction” or uncomfortableness of having to save up and then hand over cash isn’t really there in Buy Now, Pay Later situations. Keep this in mind when using any easy form of payment, like credit cards or Buy Now, Pay Later offers.

3) Ask Yourself: Do I fully understand the Buy Now, Pay Later terms and agreement, and what happens if I need to return the item or if the item is a scam? 

Caution: Buy Now, Pay Later loans have fewer protections than credit cards, and returning merchandise may be complicated. According to the Consumer Financial Protection Bureau (CFPB), which is the Federal Government’s Consumer watchdog agency, “Buy Now, Pay Later loans are not subject to some of the consumer protections applicable to credit cards. For example, Buy Now, Pay Later loans don’t offer the same dispute protections as credit cards if the item you purchase is faulty or a scam.”  

If you need to return the item, that can get complicated.

The CFPB advises, “Be sure to read both the retailer’s policies and the Buy Now, Pay Later loan terms before making a purchase using a Buy Now, Pay Later loan. Your loan repayment agreement is with the Buy Now, Pay Later lender rather than the retailer. While you may be able to return the merchandise, and you may eventually receive a credit, your loan repayment agreement may require you to continue to make payments while you are returning or disputing a purchase until your return or dispute is resolved.”  

Remember that whenever you make a financial transaction, the fine print is important. 

Buy Now, Pay Later terms can vary, and some do charge interest and late fees. Plus, if you’re unable to pay, it could be turned over to a debt collector.

After considering all of the above, think about applying an old-fashioned word of wisdom to your purchases: Don’t put off til tomorrow what you should pay for today.