The holiday season isn't cheap and the twinkling lights may make you forget about the holiday bills that will come due. Many Arizonans are watching their wallets this season. According to data firm Adobe Analytics, more consumers are opting to use Buy Now, Pay Later programs.
Here's how the programs typically work:
- A consumer makes a purchase and agrees to pay off the total bill in installments over a certain period of time
- The first payment is made at checkout with the others happening at a later date
- Purchases are often interest-free
The programs can help consumers by alleviating big upfront payments. But there is some financial risk because it's essentially a loan.
Watch out for hidden fees: Many programs are interest-free, but if you miss a payment that can change and you may be charged a large percentage. A missed payment could also mean a hit to your credit score.
Protect your personal data: A report by the Consumer Financial Protection Bureau finds a large number of Buy Now, Pay Later terms and conditions include agreements to having personal information shared with third parties.
Be wary of overspending: Since consumers do not have to pay large funds upfront, consumers who use Buy Now, Pay Later programs often check out with more items in their carts.
Now for some good news.
Earlier this year, the Consumer Financial Protection Bureau issued a new rule stating Buy Now, Pay Later companies must provide consumers with the same legal rights and protections as credit card lenders. That means if there is an issue with the product, consumers have the right to demand a refund and dispute transactions.
The best way to protect yourself is to do your research before signing. Also, be honest about your financial situation before your installment bills come due.
The U.S. Public Interest Research Group has more tips to help you avoid the financial pitfalls on their website.
