SPOKANE, Wash. — From refrigerators to headphones and even groceries, consumers increasingly click “Buy Now Pay Later” as their payment option during online checkout. However, financial experts warn shoppers to understand what they’re agreeing to before selecting these services.
Buy now pay later companies like Klarna and Affirm have become common payment options during online checkout processes. These services typically offer four smaller payments with no interest or fees if customers make payments on time.
“The buy now pay later loans, and that’s what we should call them because they are loans, they’re often integrated into checkout processes especially online,” said Jon Maroni, Financial Engagement Manager at Numerica Credit Union.
Recent changes by FICO, one of the main credit scoring companies, now include buy now pay later data when determining credit scores. This development means these payment plans can affect consumers’ creditworthiness.
“So the benefit could be that if you use these well, you might see a boost in your credit score,” Maroni explained.
But there is a downside.
“What we often find is the more complexity that we add to our payment life, AKA the more payments, the more likely it is that we’re going to be late,” Maroni said.
Buy now pay later services also handle returns differently than traditional payment methods, which can create complications for consumers who frequently return purchases.
Maroni explains this is because you’re working with a third party that has access to the money you’ve spent.
“You’re probably going to get your money back it’s just going to slow down the process,” Maroni said.
Financial experts recommend careful consideration of each purchase and honest assessment of one’s ability to make timely payments before selecting these options.
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