Pay-later purchases can cause more harm than good for consumers

Paylater programs can share personal information and report credit if payments are late
Updated: Feb. 8, 2021 at 10:38 PM CST
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WICHITA FALLS, Texas (TNN) - As the COVID-19 pandemic continues, consumers are still enjoying the convenience of online shopping. Many people are also taking advantage of another perk that many online retailers are now offering.

Popular retailers like Nike and Forever 21 are giving consumers options to get merchandise now and pay for it later, and it usually doesn’t appear until after you’ve added items to your shopping cart and you’re about to pull out your credit card to pay.

However, some financial advisors say that buying goods on credit may not be the best idea in the long run.

“People remember what layaway programs were like in the past, it’s really a more modern approach to that. It allows people to buy a product now and then kind of put off paying that over a series of weeks or months,” said Hank Bullinger, financial advisor with Bullinger Wealth Management.

Pay-later programs can have late fees and interest charges if the consumer is late or fails to make a payment, in addition to other financial consequences.

“They share your information with other companies that use that type of payment platform so that could be a possibility for fraud and also it can hurt your credit score if you miss a payment they report your credit. It can really knock down your credit score,” said Joey Fino, fraud specialist with the Texoma Community Credit Union.

Some financial experts are saying pay-later programs may not be worth the risk of debt and financial ruin that consumers could possibly face.

“Every two weeks you make a $20 payment until that $200 is paid off so it doesn’t take long but then again you look at it and say if you don’t have $200 to buy the shoes you probably shouldn’t be buying the shoes,” said Bullinger.

“If you don’t have it, don’t spend it. A lot of people make the mistake of living above their means and it bites them in the end, then there’s a bill or something that you have to pay that doesn’t get paid. Then you’re stuck trying to figure out what to do,” said Fino.

Bullinger says a good rule to remember is, if you lose your job will you still be able to make those payments and if the answer no, it’s probably best to wait until you have enough money saved in cash to make that purchase.

Securities and Advisory Services offered through Prospera Financial Services.  Member FINRA/SIPC.

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