Reader Question: The store is offering a buy now-pay later deal – is there a catch?

The only catch is that you might cheat yourself.

Many stores offer these deals and they are legitimate. If you pay the loan off on time (and it is a loan) you won’t have to pay interest. If you don’t pay it off on time, you pay interest for the length of the loan – that could be 15% interest for 12 months on a $5,000 purchase. Ouch. Some bargain.

The real problem with these deals is that most people don’t pay off the loan on time. The rule is simple: if you can’t afford to save up for a purchase, then you probably can’t afford to make the payments.

I am not in favor of this type of offer.  I strongly encourage you to start saving and wait before you buy. If you hate your furniture, take some pride in saving for a new set. In fact, brag it up. Saving for purchases is smart. You might find that you can get a deal on much better furniture if you save ahead of time instead of buying the sale items that the store is trying to unload with their “buy now-pay later” deal.

However, if this is truly an emergency purchase that can’t wait, like a furnace or hot water heater, then make paying it off a priority, even if it means cutting back. I’ll discuss clever ways to cut expenses in future posts.