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New Mexico State University

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Consider "Buy Now/Pay Later" Offers Carefully

LAS CRUCES - For some consumers, offers from retailers to buy now and pay later are almost irresistible. But before jumping at what seems to be a great deal, read the fine print in the agreement, said a New Mexico State University consumer education specialist.


Some people tend to believe that by delaying payments for a number of months, their financial circumstances will be better when the loan has to be repaid, said Susan Wright with NMSU's Cooperative Extension Service. But there's no guarantee that people will have the money when the debt is due.

Reading the agreement before making a purchase is very important, Wright said. In some cases, interest is charged from the date of purchase, not from the date of the first payment. Some offers also give consumers the chance to pay the full amount within 60 to 90 days, but if the amount is not paid in full, interest is charged from the date of purchase.

Interest charges can really add up, Wright said. Each month's interest is calculated and added to the balance owed. Then the next month's interest payment is calculated using the adjusted principal from the month before. If interest is compounded on the average daily balance, the charges can be even higher.

The second thing shoppers need to consider is whether or not they will have the money to pay for the purchase after the grace period is over. If they won't, they are no better off making the purchase earlier, Wright said.

"Before making these kinds of purchases, consumers need to consider their motives," she said. "Are they making the purchase now because the offer looks too good to refuse, or do they need the item immediately?"

It is better to save money from monthly paychecks, and to make the purchase with cash to avoid the interest payments, Wright said.