Bottom Line: ‘Buy now, pay later’ holiday gift regret

MEMPHIS, Tenn. (WMC/CONSUMER REPORTS) - Mary Wren will tell you it was the happiest and most expensive time of the year.

“If you have a family like mine, we have birthdays in October, November, December,” she says. “So, it’s back-to-back. Then I’m due in January with our baby girl.”

To make ends meet, for some holidays, she’s used the “buy now, pay later” option at checkout.

The offer? Make a down payment – usually 25% of the purchase.

Then pay off the rest in three payments.

“They’re fronting the money to the merchant for you,” said Wren. “So you’re paying them back in the long run.”

Some of these plans offer no-cost or low-cost terms upfront, but now that those gifts have been opened and payments are due – be careful! They can get very expensive if you miss a payment or are not paid in full when the promotion period ends.

Late fees can range from a few dollars or up to 25% of the loan amount.

Payments that are made late, which is 30 days or more, may get reported to the credit bureaus and negatively affect your credit score.

So next time – Consumer Reports says there might be better options than the “buy now, pay later” plans.

First, look inside your wallet.

Especially for expensive purchases, or if you think you might return something, consider using a credit card instead. Aim to pay the balance off as quickly as possible.

You may earn reward points and will have consumer purchase protections in case you have trouble with the merchant or the item you purchased.

“Buy now, pay later” loans usually don’t offer that.

If you don’t have a credit card, talk to your bank or credit union. Or if it’s a larger purchase, consider a personal 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 very small fees as long as you pay on time. And no matter which plan you pick, Mary has a final piece of advice: “Everything I pay is on autopay so it doesn’t affect my credit. So that’s good.”

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 have to contact the seller and lender before you can stop making payments, a process that can take several weeks.

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