If you shop online for clothes or furniture, sneakers or concert tickets, you’ve seen the option at checkout to “buy now, pay later” by breaking the cost into smaller installments over time
. Here's what you should know:Branded as “interest-free loans,” buy now, pay later services require you to download an app, link a bank account or debit or credit card, and sign up to pay in weekly or monthly installments. Some companies, such as Klarna and Afterpay, do soft credit checks, which aren't reported to credit bureaus, before approving borrowers. Most are approved in minutes. Scheduled payments are then automatically deducted from your account or charged to your card.
That means you could find it more difficult to settle disputes with merchants, return items, or get your money back in cases of fraud. Companies can offer protections, but they don't have to. That means more companies may let you buy more items, even if you can't afford them, because the lenders don't know how many loans you have set up with other companies.“Right now, buy now, pay later can’t generally help you build credit, but it can hurt,” said Saunders.
When Apple recently announced it will be creating its own buy now, pay later service, Josiah Herndon, 23, joked on Twitter about “paying off 6 carts of I can’t afford with Apple, Klarna, Afterpay, PayPal Pay in 4, Shop Pay in 4, & Affirm.” If you're uncertain whether you'll be able to make payments on time, consider whether the fees charged by buy now, pay later companies will add up to higher charges than the penalties and interest a credit card company or other lender would charge.As the cost of living increases, some shoppers have started breaking up payments on essentials, rather than just big-ticket items like electronics or designer clothes.
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