The holiday season is coming and for a lot of us this year gift giving/buying is a little more stressful this year. With many of our everyday costs having gone up this year, there is probably a little less room in the budget for holiday spending. With budgets being a bit tighter we’re seeing new options on check-out screens. These ‘Buy now, Pay Later’ options are like any other tool – not good or bad, as long as you understand how to use them and what they do!
3 Things to consider when using ‘Buy now, Pay Later’ options
Actual Cost (Interest/Fees)
When looking at ‘Buy now, Pay later’ programs there are options for all sorts of financial situations. This flexibility means that how each company charges you for the convenience of buying now can vary. Some charge interest on what you buy and that rate can vary dramatically, anywhere between 3% and 25%. Others charge ‘origination fees’ instead of interest or have fees associated with how you make your payment. It’s important to understand how the fees and interest rates work because they determine how much you’re actually paying for that gift.
How much flexibility is it really?
Understanding how flexible the program you’re entering into matters when choosing a ‘Buy now, Pay later’ program. How many payments will you need to make? How frequently do they need to be made? Options can range from 3 to 36 months with payments being made weekly, biweekly, or monthly. If you change your payment frequency or pay it off early will that cost you? When thinking about the impact on your budget going forward make sure you understand how often and for how long you’ll be paying for that gift.
How much control do you really have?
If you’re picking out a ‘Buy now, Pay later’ company before you start shopping be sure to understand how much control you really have, Some programs offer no credit check or only a soft credit check but can limit the places you can buy from. Others will make a decision on each purchase you make which you won’t know until checkout. Meaning you can get approved for a program but have individual purchases declined. When you choose a program make sure you understand the amount of control they have on your gift giving.
If you find yourself feeling the pinch lately and exploring these types of options, realize you’re not alone. Times are tough out there for a lot of us and having the access to information and expertise is important. At FED Benefits Center, we’re proud to be that resource for Federal Employees and have ways to help navigate this rough ride. If you’re wondering where to turn or how to get back on track, give us a call and put our expertise to work for you!