Crushing inflation is going to make the holiday season pretty expensive – as if it wasn’t before. Shoppers who aren’t able to pay for their purchases in full right away might consider reaching for a credit card, but there’s another payment option that’s been gaining traction over the last several years.
- At 24, Bryce Harper won’t fixate on future: ‘I want to live for now’
- Selena-inspired series in the works for ABC
- portugal national football team vs liechtenstein national football team lineups
- Chicago White Sox pitcher Lance Lynn ejected for belt toss at umpire
- Angels shut down by Jharel Cotton in major league debut
Buy now, pay later models are gaining popularity. What are the risks?
Buy Now, Pay Later (BNPL) services enable you to buy your items right away and pay for them over time, often without interest. But it’s not a great choice for everyone. Here’s what you need to know about BNPL.
How does Buy Now, Pay Later work?
Buy Now, Pay Later services, including Affirm, Afterpay, and Klarna, enable you to make purchases at participating retailers with just a small upfront payment. This is often 25% of the purchase price.
Buy now, pay later delinquencies could get ‘dangerously’ high. What will companies do about it?
Then, you pay the rest back over time in a series of interest-free installments. You can have the money automatically deducted from your bank account or charge it to a credit card.
Pros of Buy Now, Pay Later
Buy Now, Pay Later offers the following advantages:.
Cons of Buy Now, Pay Later
Buy Now, Pay Later services have their drawbacks too, including:.
Alternatives to Buy Now, Pay Later
If you don’t think BNPL services are the right choice for you this holiday season, try one of these options instead.
Food bills soar:More people are paying for groceries with buy now, pay later apps as inflation pinches.
Waiting to make a purchase
Begin saving up now for your holiday purchases and pay for your items in full upfront so you don’t have to borrow money or worry about interest charges at all. However, this may not be feasible if you’re hoping to buy a popular item that’s likely to sell out quickly.
Layaway also enables you to pay for an item over time, but unlike BNPL, you can’t bring your items home with you until you’ve paid for them in full. Many department stores and some online retailers offer layaway, but it’s important to review the terms first. Be sure to learn if there are any deadlines or associated costs before you sign up.
Apple Pay Later is coming soon to iOS 16. What you need to know about buy now, pay later option.
Rewards credit card
Using a rewards credit card can help you earn points you can put toward other holiday purchases. You’ll also have a little bit of time between when you make your purchase and when you have to pay for it. But you should never charge items to your credit card that you aren’t sure you can pay back in full at the end of the month. Carrying a balance on a credit card is costly and the interest you’ll pay far outweighs any benefit you get from rewards.
How to get started with Buy Now, Pay Later
If you are interested in using a Buy Now, Pay Later service, you should first check with the retailer you’re shopping with to see if this is an option. Many companies that offer BNPL now advertise it as a payment option, but for others, you may have to add the item to your cart and proceed as if you were going to checkout to see if the company works with a BNPL provider.
Have questions? How to buy now, pay later with popular apps.
Next, review the terms of the service. Pay attention to how much you have to pay upfront, what your installment payments will be, and how often you have to make the payments. You should also look into what fees the company can charge you if you aren’t able to keep up with your payments.
Finally, keep track of how much you’re spending to avoid going overboard. BNPL purchases can feel pretty small when you’re only paying 25% down, and if you’re shopping on multiple sites, you can rack up quite the bill before you realize.
If you’re worried about accumulating debt, BNPL may not be the right choice for you. Try one of the other suggestions listed above and start planning your holiday shopping list well in advance so you know what you need and how much you can afford to spend.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Affirm Holdings, Inc. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
Offer from the Motley Fool:.
Alert: highest cash back card we’ve seen now has 0% intro APR until 2024
If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
Read our free review.