Buy Now, Pay Later at 0%… What’s the Catch?

If you’ve done any online shopping in the past year . . . which I’m pretty sure is everyone? . . . you’ve seen the Buy Now, Pay Later services like Affirm, Klarna, and Afterpay when you’re checking out.

You pay in installments at 0% interest with only a light credit check . . . or no credit check . . . and if you’re late on a few payments, that’s probably cool.  So the only real question here is:  What’s the catch?  I mean, there’s gotta be a catch, right?

The answer is . . . sort of.

As long as you’ve got the money to make the payments, there’s not much downside.  You’ll get a loan with no interest and some of these services even will give you rewards for using them.  They charge the stores, not you, a fee for their services.

But the downsides CAN come in if you buy too much stuff with these services, especially more than you can afford.  Then you might get hit with late fees or get your credit score dinged.

Most of the Buy Now, Pay Later services won’t make any positive reports to the credit bureaus, so paying on time won’t help your credit score . . . but they WILL make negative reports if they have to, so it could HURT your credit score.

For now, though, these services are all fighting to get customers on board and they REALLY want your business . . . so take advantage of whatever rewards, signup bonuses, and long payment terms they give you.


Categories: James and Kim in The Morning