Financial Wellness Minute: What is Buy Now Pay Later?

Get smarter about your money with this Financial Wellness Minute. You may have heard or seen "Buy Now Pay Later" options when purchasing items online or in person at the check out register. I'm Vic Dale, manager at Mid Minnesota Federal Credit Union in Alexandria. Buy Now Pay Later, is when your total purchase is divided into equal payments or installments. Initially this sounds good, but you are still getting into debt and taking on the risks associated with debt. Here are things to think about when considering a Buy Now Pay Later plan:

• Look for zero-interest plans and watch out for plans that may charge interest and fees.
• You do not need a credit score to use these types of plans. That can be good for those with no or low credit scores. But be aware, these payments are not reported to the major three credit bureaus (Equifax, Experian and TransUnion), so you are not establishing a credit history for your future.
• They are becoming readily available at major retailers when you check out, which can be convenient. But this convenience can easily turn into overspending if not careful.
• Some plans have limited customer service options. So if you have concerns or questions, it may be difficult to get resolution.

As an alternative to buy now pay later plans, a credit card may be better. By paying your credit card responsibly, you may be able to earn rewards with your purchase, build your credit history over time, and have additional protection because the credit card industry is carefully regulated. Be cautious if you do use a buy now pay later plan. Make sure it is for necessary items such as a computer or refrigerator that has a long life, not everyday needs such as food and clothing. These plans if not used carefully can quickly turn to financial difficulties. Want to know more about similar topics or have a weekly financial wellness tip sent to you? Sign up below or, contact your local Mid Minnesota Federal Credit Union Office. Sign Up for a Weekly Financial Wellness Tip Mid Minnesota Federal Credit Union is federally insured by the NCUA and we are an equal housing lender.