Houston - July 4th weekend is a big sale-shopping weekend. But as more online shoppers are using Buy Now, Pay Later financing, a new study shows many are getting themselves into trouble.
Buy Now, Pay Later (BNPL) is financing you often see when you're ready to check out from shopping online. It let's you break the cost over weekly or monthly payments, often for zero interest.
We're talking about PayPal Credit, AfterPay, Affirm, Klarna, Quadpay and ZipPay.
A new survey by C+R Research finds 51% of consumers use Buy Now, Pay Later options offered at checkout by thousands of online retailers. The average number of items bought is about four. The average total debt is $883.
But here's the down side.
C + R Research found 46% of these shoppers say they regret financing something that was ultimately "too expensive."
59% said they've purchased an "unnecessary" item they couldn't afford. And 56% admitted to falling behind on monthly payments.
Remember, some Buy Now, Pay Later options charge interest or late fees if you miss a payment.
For example, a $100 purchase could cost you an extra $30 late fee. If they automatically charge your credit card, that means interest. If they charge your debit card and you can't cover it, your bank could charge you a $30 overdraft fee. That could mean a total of up to $160 for a $100 purchase.
And some BNPL's report missed payments to collections or the credit bureaus, which could hurt your credit score.
Here are some tips from the experts:
- First, see if your credit card offers a zero or low interest payment plan instead. American Express, Chase and Citi now offer similar payment plans.
- If you use BNPL, consider the payments a monthly bill and see if it fits into your monthly budget.
- Schedule automatic payments from your bank account, or set up text or email reminders to pay the bill on time.
- If you don't think you can make all the payments, save up for the purchase in advance and pay for it in cash.