#FinancialFridays: Christmas Spending and Buy Now Pay Later Schemes.

BEWARE! There is a new way to pay for small purchases… and you should avoid it.

More retailers are offering the choice of paying by installments, even for small purchases like cosmetics and clothes. Christmas is a big opportunity for stores to promote the buy now, pay later system. These are advertised as payment plans or a series of payments, like four bi-weekly payments, with no interest charges or fees. If you pay on time, your payments will be the cost of your purchases divided by the number of installments.

Retailers use a third party company to track the payments. If you are on time with payments and pay in full, retailers probably cover the fees and commissions to the third party company, which can be twice those paid on credit card transactions or more. BUT REMEMBER, retailers don’t like paying fees so they are relying on high numbers of people missing payments and then covering those fees for them. They have also found that customers who use buy now, pay later services tend to spend more.

So, what is the problem?
•Using buy now, pay later services encourages people to buy things they can’t afford.
•These buy now, pay later services are marketed to people in financially vulnerable situations.
•Retail staff are taught to use these as a tool to sell things to people who may seem reluctant to commit to buying something right now.
•The fees and interest for these services are not clear or openly disclosed.

One of the biggest lies we tell ourselves is that, we may not have the money to pay for something now but in the near future we will… AND THEN the car breaks down, or we have to take a day off work and lose that expected money we were relying on to pay for the small purchase. And that small purchase now has an additional fee on it because we couldn’t pay on time or in full.

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Are you facing financial challenges? If you need help getting your finances back on track, reach out to Caroline, our Financial Literacy Program Coordinator at advice@unitedwaybg.com or 519-376-1560. She can help you look at your financial situation and decide on a positive path forward.