“Buy Now Pay Later”. We see it everywhere.  On-line, in store and in print – this phrase and concept is offered for nearly everything.  The real question is – who does buy now pay later really help?

Many will remember the concept of layaways.  Retailers would hold an item for you, and you would make payments on it – interest free – until it was paid for.  Once it was paid for you received the item.  It was a good concept that helped many people save for big ticket items or prepare for Christmas.  The excitement of receiving the item after the lay-away payments were completed was part of the enjoyment of the whole process.  Somewhere along the way – credit companies decided this concept was something they could capitalize on.  Lay-away disappeared and instead retailers offered credit cards and credit programs to their customers.  Then there was the instant gratification of getting the item on the spot and paying for it later.

There are many variations of the buy now and pay later situation.  Being aware of what exactly you are signing up for is the first thing you need to do.  In a current big box store flyer, most of their higher priced items are broken down into the price per month over 24 months.  This is shown interest free and no finance charges applied which all sounds great.  Of course, then comes the fine print (literally tiny print on page 31 of the flyer) – if you are late on a payment the regular credit card interest rate applies, but if you miss a payment the balance becomes due at the full interest rate.  This very quickly becomes a big issue.

Furniture stores commonly offer various don’t pay now pay later programs.  One current is offering no payments until 2024 – except taxes and fees up front.  What are those fees?  The fine print shows an administrative fee of $99.99 plus a deferral fee of $59.99 – $99.99.  If the balance paid in full by 2024 you will pay interest at rate of 31.99% to 37.99%.  These interest rates become problematic very quickly.

These programs exist everywhere you look from services to products.  They come in different forms but there is always a fine print catch to be aware of.  There are many companies that have jumped on board to specially offer these programs to on-line retailers.

So, back to the original question – who do these programs really help?  The consumer can benefit in certain circumstances – but only if they do indeed get the item paid for within allotted time.  However, the true beneficiaries of these programs are the retailers and credit card companies.  Consumers spend more because it is not coming out of their pocket at that moment, and they do not have to have money available.  We live in a world of instant gratification and the prevalence of these programs certainly supports that. This is obviously a benefit to retailers.  There are undoubtedly people who will default or will not pay in full, so the credit card companies are making lots of money on these programs as well.

Spending money you have not yet earned is a slippery slope.  We all would like to think our situations are going to stay the same, or improve – but unfortunately, we cannot predict the future.  Spending money that you are going to be earning a year or two from now on something that is not essential is not a good idea.  It is far better to save towards the item and then buy it when you have the funds available.  You will have a greater sense of accomplishment and value the item more if you do it this way.

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