Consumer Reports: Buy Now, Pay Later Holiday Gift Regret

LAS VEGAS, Nev. (CONSUMER REPORTS) - For Christmas shoppers who signed up for those buy now, pay later plans, the holidays are over, and it’s time to pay up—maybe more than you expected. So, Consumer Reports is here to make sense of these short-term loans with important advice on how to dodge costly fees and what to do next time.

Some of the plans offer no-cost or low-cost terms up front, but now that those gifts have been opened and payments are due, be careful. Late fees can become costly if you miss a payment or are not paid in full when the promotion period ends. Late fees can range from a few dollars up to 25 percent of the loan amount. Payments made late, 30 days or more, might be reported to the credit bureaus and negatively affect your credit score.

Next time, Consumer Reports says there might be better options than buy now, pay later plans. First, look inside your wallet. Consider using a credit card instead, especially for expensive purchases or if you might return something. Aim to pay the balance off as quickly as possible. You may earn reward points and have consumer purchase protections if you have trouble with the merchant or the item you purchased. Buy now, pay later loans usually don’t offer protections.

If you don’t have a credit card, talk to your bank or credit union. If you’re making a larger purchase, consider a personal loan. Interest rates average just under 11 percent for a three-year loan.

Finally, if you decide to buy now and pay later, see if you can pick the traditional pay-in-four plan. That’s when you’ll make four payments over six weeks with no or minimal fees if you pay on time. And no matter which plan you pick, autopay ensures your bill is always paid on time.

One more caution about buy now, pay later: Returns can be a hassle since you sometimes must contact the seller and lender before you can stop making payments, which can take several weeks.

Copyright 2024 KVVU via Consumer Reports. All rights reserved.