Holiday shoppers put billions on ‘buy now, pay later’ plans. Now payments are due.

Missed or late payments can make those short-term loans expensive.

SAN ANTONIO – Holiday shoppers now face the financial hangover - debt. That includes the increasingly popular buy now, pay later plans. Online holiday shoppers put $16.6 billion into those services, according to Adobe Analytics.

Now that the gifts have been opened, it’s time to pay up.

Some of the plans offer no-cost or low-cost terms up front. But, the services can get expensive if you miss a payment or don’t pay in full by the time the promotion period ends. Late fees can range from a few dollars to 25% of the loan amount.

“Payments that are made late, which is 30 days or more, might get reported to the credit bureaus and negatively affect your credit score,” said Consumer Reports’ Lisa Gill.

Next time, Gill said there might be better options than buy now, pay later plans.

“Especially for expensive purchases, or if you think you might return something, consider using a credit card instead. Aim to pay the balance off as quickly as possible. You may earn reward points, and will have consumer purchase protections in case you have trouble with the merchant or the item you purchased. Buy now, pay later loans usually don’t offer protections,” Gill said.

If you don’t have a credit card, talk to your bank or credit union. Or if it’s a larger purchase, consider a personal loan. Interest rates average a bit under 11% for a three-year loan.

Finally, if you decide to buy now and pay later, see if you can pick the traditional pay-in-four plan. That’s when you’ll make four payments over six weeks with no or very small fees as long as you pay on time. And no matter which plan you pick, autopay ensures your bill is paid on time.

One more caution about buy now, pay later: Returns can be a hassle since you sometimes have to contact the seller and lender before you can stop making payments, a process that can take several weeks.

About the Author

Marilyn Moritz is an award-winning journalist dedicated to digging up information that can make people’s lives a little bit better. As KSAT’S 12 On Your Side Consumer reporter, she focuses on exposing scams and dangerous products and helping people save money.

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