Tips for Shopping Online and Paying in Installments

From the Better Business Bureau Northwest and Pacific:

As back to school shopping starts to ramp up, many online shops are offering pay in installment services that target both high school and college-age buyers.

•As with any financing option, consumers should understand what they are getting into by doing some research before signing up, to make informed purchasing decisions and avoid getting in over their heads.

How Paying in Installments Works

As you start the checkout process with an online store, you notice that in addition to the option to pay with a debit or credit card, you can choose to pay for your purchase in a specified number of installments.

The opportunity to split up payments is appealing to many shoppers, but especially to younger shoppers who don’t tend to have and use traditional credit cards.

Most of the time, this option comes from a third-party financing company that makes money by charging retailers a small percentage of each sale made through their financing options and by collecting late fees and interest from consumers.

Interest rates on pay in installment purchases can range between 0% to 30%, depending on your credit history and the retailer. Installments can last for as little as a few weeks or as long as 39 months.

You’ll likely need to be approved by the financing company before you can take advantage of an installment payment plan.

Pay in Installment Smart Shopping Tips

• Don’t forget you are borrowing money. Even though many installment payment services come with only a few small payments and zero-percent interest, it’s critical you keep in mind you are still borrowing money to enjoy a product before you’ve paid for it in full.
• Stick to your budget. Think about how bi-weekly or monthly payments could affect your budget – even if the payments seem small.
• Read the fine print. Before you sign up to pay in installments, be sure you understand exactly how the service works. Find out what company is financing your purchase, how long you have to pay off the purchase and in how many installments, how they handle late payments, and how much interest you’ll be charged, if any.
• Get to know the financing company. If you do decide to take advantage of an installment payment plan, look up the financing company on BBB.org to make sure they are a reputable company with honest business practices.
• Know how your credit could be affected. Keep in mind that unpaid debts can be sent to collections agencies and after a delinquent period of 90 days can be reported to credit bureaus. This could have a negative impact on your credit score.