Watching Your Wallet: How to handle buy now, pay later services

FRESNO, Calif. (KFSN) -- Chances are you've seen this in your online shopping cart, a short-term financing option that lets you split a purchase into equal, smaller installments.

In addition to investing in assets that outpace inflation and leveraging credit, "buy now pay later," or BNPL services, are growing in popularity as a way to extend purchasing power.

"These are zero-to-low-interest products," says Miranda Margowsky, Head of Communications at the Financial Technology Association. "There are no revolving balances, meaning there's no compounding interest, no interest on interest."

While the ease of small installment payments can tempt you to buy things you can't actually afford, Margowsky says it also gives you the opportunity to build stronger financial habits.

"The way it works with BNPL is you pay 25% at the point of sale, and then you pay three installments, 25%, 25%, 25%, and then you're done," she said. "There's a lot of transparency and simplicity in the product."

Missed scheduled payments can result in penalty fees, and repeated missed payments may result in being unable to use the service.

Margowsky says that can also be considered a safeguard, keeping consumers from accumulating debt.

She adds that local and small businesses are leaning into the service.

"This is increasingly how people may want to pay, and being able to offer this as a payment option, similar to accepting a credit card," Margowsky said. "It's just a way to meet your customers where they are and offer the payment options that people want to use."

If the buy now, pay later provider reports to credit bureaus, a missed payment can be recorded on your credit report and could impact your score.

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