The “Buy Now Pay Later” promotion is a tactic employed by sellers to boost sales, or by credit card companies to woo new customers into signing up for their cards. It is a flexible deferred payment for your purchases that extends up to a whole year when you spend a certain minimum amount, like $50. In reality, it is an interest payment option, but the cardholder or credit customer can avoid paying interest by settling the full amount—the cash price of the item (and any other charges)—within the year.
Get the value of using the item and paying for it later
The beauty of this method is that it not only allows you to get your money’s worth and good use out of the items you are buying, but also to pay for them later, thus helping you to plan your finances. You can also save money while simultaneously paying for the item and enjoying its use.
However, if you fail to pay fully for the item before the end of the given period (most likely 12 months), you pay the amount with all the interest as per the preassigned plan. The interest rates are well outlined at the time of purchase.
How “Pay Later” promotions work
While some sellers (retailers) offer the “Buy Now Pay Later” promotions directly from their own website, a few others offer online payment arrangements that you can use with different websites. Such payment plans are referred to as point-of-sale installment loans. They involve spreading fixed monthly payments over a number of months that are determined by the value of the item that you have purchased.
Effect of “Pay Later” promos on your credit score
“Pay Later” promotions may or may not affect your credit score depending on whether the service you have used reports to credit agencies. You should read through all the terms and fine print to know how the purchase may impact your credit. In case the service you have used shares information with credit bureaus, the payment of your outstanding amount will influence your score. In general, timely payments will improve your score while delayed payment or defaulting will hurt your score.
You should also know that getting newly opened “pay later” accounts will lower your score by reducing the average credit age. Also, any misreporting can affect your score, so it is prudent to get credit reports frequently and ascertain that the payments have been reported correctly. However, if your score is already incorrect, whether due to the “Pay Later” promotions or other things, you should seek professional services from Boostcredit101 to help improve your score and offer you crucial guidance.
On the other hand, If you buy from a seller who does not forward reports to credit bureaus, “Pay Later” promos will have no impact on your score. However, if you default and the seller hands over your account to a third-party debt collector, your score may be negatively affected.
Although “Pay Later” promotions may not seem like it, they are a form of credit, so you need to consider your ability to pay off your purchases before signing up for the card and whether it will affect your score or not. Also, avoid taking several of the “Pay Later” deals at the same time, as they may overwhelm you. Moreover, compare the totals that you can pay upfront and that you can pay when using the plan. The installment plans will usually be higher since it has an interest component, so you will end up paying more.
“Pay Later” promotions can be a good financing option or item acquisition method, but you must take the necessary steps to avoid high costs and damage to your credit score.