Advice from the Consumer Financial Protection Bureau
For holiday shopping, and for post-holiday sales, in stores and online, more and more people are turning to Buy Now, Pay Later arrangements. A typical Buy Now, Pay Later payment schedule splits your purchase amount into a specified number of payments. For example, you pay the first one at checkout, and then one payment every two weeks for six weeks.
Using Buy Now, Pay Later can be convenient, and usually free from interest charges. Still, if you choose Buy Now, Pay Later, there are a few things you may want to watch out for.
- Because you can make multiple Buy Now, Pay Later purchases through different services or merchants in a short time, it’s easy to end up with more debt than you intended, or can afford.
- Buy Now, Pay Later products generally require your installment payments to be automatically paid, typically debited from your bank account. In contrast, with other loans lenders generally send you periodic statements and grant you a grace period for repayment, so those loans give you more control over which bill to pay when, and what payment method to use.
- Some Buy Now, Pay Later services charge multiple late fees for a single missed payment, or try more than once to collect automatic payments from your checking account if they don’t go through. This could mean you pay higher late fees than you expected or incur multiple overdraft fees.
- Many Buy Now, Pay Later services and apps use your data and shopping history to encourage you to buy more, and spend more.
- If you return an item, Buy Now, Pay Later companies may still end up taking regular payments for the full amount of the loan. And, because there are three different companies involved – the Buy Now, Pay Later company, the seller, and your financial institution – it can be challenging and stressful to resolve a problem.
You can get more facts about Buy Now, Pay Later purchases on our site:
Thank you,
Office of Financial EducationConsumer Financial Protection Bureau
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