Houston – Parents know the back-to-school financial struggle all too well. You gotta buy pencils, paper, safety scissors and not to mention the pressure to buy a new wardrobe for the kids. It all adds up.
But what if you split it up over four interest-free payments? Those beefy bills may be easier to handle.
”It’s probably the most stressful time with trying to get everything for each of my three kids,” said Brittany Goodwin, a mother in the Spring area. “Getting backpacks and Chromebooks and clothes and shoes, it can be really expensive.”
Parents like Goodwin are turning to ‘buy now, pay later’ (BNPL) plans offered on most websites these days. Companies like Klarna, Afterpay, Affirm, Sezzle and Zip all offer similar installment payment plans.
Nerdwallet says 78 million Americans are already using BNPL plans over the past year.
Here’s how BNPL works:
If you buy a $400 computer, you make the first payment of $100 at checkout, online, or at the store. The remaining three payments would be due every two weeks over a six-week plan. If you pay on time, there is no interest or fees.
“In some cases, buy now, pay later can be more effective than a credit card if you’re looking to avoid interest or fees, but you have to make sure you can pay it off on time in order to get those benefits,” said Melissa with Nerdwallet.
Long-term BNPL plans that allow you to pay over 6, 12, or 24 months can come with interest rates as high as 36%. According to Lending Tree, 42% of BNPL users report making late payments.
“It’s nice that we have all this technology to make our lives easier, but it can also get us spending into a hole,” said Richard Rosso, a certified financial advisor with RIA Advisors.
So what’s the best way to use BNPL plans?
- Buy all the new school clothes and supplies at one store.
- Make one big purchase on one big BNPL bill.
- One plan makes it easier to manage and pay on time to avoid fees.
The Better Business Bureau warns about complaints related to buy now pay later services. Earlier this year new rules did give customers better protections. Check it out here.
