The buy now, pay later plans are especially popular with consumers trying to stretch their paychecks. At first glance, it may seem like a great idea, but before you click the button think twice before committing to installment purchases.
The bottom line is, that credit is credit.
These plans are essentially point-of-sale loans. Applying for financing is quick, easy, and when money and time are tight it seems like a good idea.
However, and this is where I pop the bubble, sorry. Quick and easy with our money isn’t a good idea in this case. The instant gratification we feel allows for more impulse buys. Before we know it, we have overspent on stuff you really don’t need and probably wouldn’t buy it if were paying 100% of it upfront. The more of these small purchases spread out over several services will also make it more challenging to actually track your spending. This makes it easier to
fall into debt when you’re trying to get out of debt. The same rules apply to buy now, pay later plans just like a credit card. Miss a payment and there are late fees and/or high interest that will be added.
Before you use any of the buy now, pay later plans, read the fine print carefully to make sure you understand the terms and conditions. Also, these plans/companies have credit reporting policies. While a buy now, pay later may not report your on-time payment, they will surely report a missed payment and collections. The credit card companies report to the credit bureaus on-time payments helping you to build a positive credit history.
Do you have questions about how to reduce your debt while continuing to use credit cards to build a positive credit history?
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Your Coach, Roxanne