Buy now, pay later isn’t as simple as you think

You see them on about every shopping site now. Think of “BNPL” (buy now, pay later) as a short-term financing plan. With a few clicks, you request a limited loan agreement to pay for items over time.

Even Apple is getting in on the action. With Apple Pay Later, buy that $1,000 iPhone today and pay it off over four payments. PayPal has one, too, along with services like Afterpay, Affirm and Klarna.

I like to put on my detective hat (it looks like Columbo’s) when a new wave of financing apps like these pops up. They can feel a little … scammy. Hidden strings can lead to unexpected charges, unpleasant contracts and new debt disasters. Not cool! But certain BNPL apps with “soft” credit checks, like Apple’s service, can help manage payments.

Don’t worry. I’m on the case! If you or a loved one is using buy now, pay later apps, I’ve got the red flags you need to watch for to avoid rotten deals.

Red flag 1: Sneaky interest rates

Almost all BNPL apps say they have “zero interest payments.” For some, like Apple, that’s true. If you make payments to your Apple Card account on time, you won’t accrue interest. But BNPL apps aren’t well-regulated, and some make false promises and hide interest rates in the fine print. 

Sorry to say, but you need to grab your reading glasses. Check every line and link of fine print for hidden interest rates. As a rule, don’t accept any form of interest rate, even 1% or 1.5%. That may sound great on a mortgage — but you can get these mini loans for zero interest!

Red flag 2: Hidden fees

Late fees are standard for BNPL apps. Miss a payment? You’re gonna get some heat. But hidden fees are the real worms in the apple. Surveys have found that almost 30% of people who use BNPL run into problems, like being overcharged for a purchase for no reason. No good. 

Hit the Better Business Bureau site and check for anything concerning before you say “Yes, please.”

Red flag 3: You can’t buy that

Even reputable BNPLs have limits. They’ll only work with specific merchants, for example. Check to see if that big purchase is covered before signing up.

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Why you should reconsider using buy now, pay later loans

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What to know about "Buy Now, Pay Later"

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Using services like Klarna or Affirm, you can pay for purchases over time. Here’s how to decide if they fit your needs.

Why you should think twice before using 'buy now, pay later' services

How’s your holiday shopping going? It can be hard enough to find everything this year thanks to chip shortages and supply chain issues, not to mention the expense.

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Buy now, pay later: Amazon adds option to pay in installments

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