KALAMAZOO, Mich. — Christmas is two weeks away, and if you’re using "buy now, pay later" apps, it could cost you in the long run.
“When you step back from that and think a little bit about it, what you're really saying is 'I'm going to be committing myself to this payment for four months,'” said Todd Mora, program manager for WMU’s Sanford Center for Financial Planning and Wellness.
With Christmas right around the corner, many people are looking for the perfect gift. According to a survey done by Forbes Advisor and OnePoll, they found that out of 1,000 shoppers, 64% planned to use "buy now, pay later" services and 70% planned to use those options to spend more than they planned on.
“Where people are in trouble is that they will do multiples of these, and all of a sudden, they've got themselves overextended for the next four months.” Mora said even though these services allow you to get your gifts now, they can cause bigger issues down the road.
“They either have challenges with missing payments or they have to convert that into a longer payback period, like a year or so,” he said.
According to Mora, making late payments or changing the length of your payment plan can generate fees, which then tack on more interest. Not only will it impact your finances in the long run, it can also impact your credit score.
“If you're late on a payment, the three major credit bureaus are starting to incorporate 'buy now, pay later' into the credit report,” Mora said.
The best way to handle these kinds of services is to create a budget before you start shopping. Mora said it’s best to determine what your gift budget is and try to avoid overspending.
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