Whenever someone offers you a deal that sounds too good to be true (No Interest Until 2013!), there's usually a good reason to check the fine print. In the case of "buy now, pay later" offers often featured by furniture and appliance stores, the catch is that you really do have to pay later. If you can't afford to pay for the items right now, how likely is it that you'll be able to afford them later, when the bill comes due; As appealing as these financing deals sound, you need to take a very honest look at your financial situation -- and the fine print -- before signing.
To start with, you'll likely pay a service charge and the taxes up front, just to set up the buy-now-pay-later deal. Check out that service charge: How much is it' If it's a significant amount, it might be cheaper to finance the item through a low-interest line of credit, rather than a financing deal offered by the store.
Also investigate the consequences if you can't pay in full when the money is due. Many of these "deals" include an acceleration clause, which means that if you don't pay the full amount on time, you end up paying interest from the date you bought the item -- and there may be additional penalties, too. Think about what could happen between now and the due date -- family additions or deployments, for example -- how could they affect your ability to pay the bill?
In addition, many furniture and appliance companies 'sell' your buy-now-pay-later financing deal to a completely separate financing company. That means you likely won't be dealing with the store where you bought the item -- your financing paperwork should make this clear, but sometimes you have to look quite closely for this information.
Here are three top tips for buy-now-pay-later deals:
1. Think twice about signing on for one of these.
2. If the interest-free deal has a payment schedule option, where you could make monthly payments, seriously consider this route -- it helps you budget for the purchase effectively, and doesn't leave you owing a large sum at a future date.
3. If you do decide to go the buy-now-pay-later route, ensure that you pay your bill in full at the appropriate location at least a week before it becomes due, so that there can be no argument about whether the financing company received its money before the due date. Keep your receipt that shows where and when you paid.
And finally, if you do decide the buy-now-pay-later route is right for you -- make it easier to pay the bill when it's due by putting money aside every month in a separate savings account. This takes some discipline, but it will be worth it when the money's there to pay that bill.
Stanley J. Kershman is The Debt Doctor. A leading authority on solving financial disasters, he has been helping people get out of debt for more than 25 years. He's also the author of Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness (Pepper Pike Press), a practical handbook that walks you through the process of improving your money management skills. For free copies of Stanley's handy budgeting worksheets, visit www.debtonadiet.com.
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