The holiday season is approaching, and many people are starting to search for the perfect gifts online. One popular payment option that is gaining attention from financial experts and consumer watchdogs is the “buy now, pay later” option. While it may seem like a convenient way to make purchases, investigative reporter Lisa Gill from Consumer Reports advises caution when using this payment method.
Buy now, pay later options work similarly to layaway plans, where you make several payments over time for a specific item. The appeal of this option is that you can avoid adding to your credit card debt, especially if you are already maxed out. Additionally, for individuals who do not have credit cards and rely on debit or prepaid cards, buy now, pay later options can provide a way to make small dollar purchases without undergoing a credit check.
However, there are some red flags to watch out for when considering buy now, pay later options. If you are unable to pay for the item upfront or do not have enough available credit, it may be a sign that you should reconsider using this payment method. The convenience of making small payments over time can lead to accumulating multiple loans, which can become difficult to manage and increase the risk of missed payments.
When it comes to choosing items to purchase using buy now, pay later options, it is recommended to avoid high-dollar, high-ticket items. These purchases can be risky, especially when it comes to returns. Consumer Reports found that a significant number of consumers faced challenges when trying to return items purchased through buy now, pay later plans, leading to issues with payments and credit scores.
Another consideration when using buy now, pay later options is the potential difficulty in returning multiple items, such as clothing or shoes. Many consumers have reported problems with returning items and receiving refunds while still being responsible for payments. The Consumer Financial Protection Bureau has taken steps to address these issues, including issuing guidelines to ensure consumers have the right to return items and end payments if needed.
Overall, while buy now, pay later options can offer convenience and flexibility, it is essential for consumers to be aware of the potential risks and limitations associated with this payment method. By understanding the terms and conditions of these options and making informed choices, consumers can avoid financial pitfalls and enjoy a stress-free holiday shopping experience.
