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A12 BUSINESS
Wednesday 7 december 2022

Millennial Money: How credit can beat

buy now, pay later

By MELISSA LAMBARENA of
NerdWallet
At first glance, a “buy now,
pay later” plan’s promise of
no interest or upfront fees
can seem more appealing
than a credit card’s terms.
Dividing a transaction into,
say, a pay-in-four install-
ment plan sounds straight-
forward and manageable.
Unlike credit cards, though,
these plans lack certain
consumer protections and
are sometimes unpredict- Credit cards as seen July 1, 2021, in Orlando, Fla.
able. In this way, credit Associated Press
cards can be superior to
pay-in-four buy now, pay Credit cards simplify track- says.
later plans, making it eas- ing multiple purchases and 3. TRANSPARENT DISCLO-
ier to manage payments, payments in one place. If SURES
dispute transactions, get you’re juggling buy now, Regulatory requirements
refunds, establish credit or pay later plans from sev- on credit cards can of-
access certain debt-pay- eral companies with differ- fer additional protections.
off options. ent due dates, it’s not as The Truth in Lending Act
Here are some cases in seamless. Some buy, now requires credit card issu-
which a credit card can pay later companies may ers to provide disclosures
come out ahead: require automatic pay- that show the card’s terms
1. CREDIT REPORTING ments linked to a bank ac- and a box that outlines the
Credit card issuers typically count, but that can lead costs of carrying the card
report on-time payments to overdraft fees if that ac- such as fees, interest rates,
to the three major credit count lacks funding. minimum interest charges,
bureaus Equifax, Experian Compared with light us- grace periods and other
and TransUnion which can ers of buy now, pay later details. After launching
help you establish a credit plans, heavy users have an investigation, the Con-
history. That’s not always a larger decline in finan- sumer Financial Protection
the case with buy now, cial health in factors like Bureau, or CFPB, deter-
pay later companies. De- overdraft fees or late fees mined in a report that most
pending on the lender and , according to the study buy now, pay later lenders
the plan, you might only “ Buy Now Pay (Pain?) don’t provide these stan-
see an account reported Later,” co-authored by Ed dard cost-of-credit dis-
to the credit bureaus if it deHaan, associate profes- closures or periodic state-
is sent to collections after sor at the Foster School of ment.
you default on a loan and Business at the University of 4. CONSUMER PROTEC-
that kind of blemish can Washington.A credit card TIONS
stay on your credit report can also derail a budget, If an item arrives damaged,
for several years. but it has a big guardrail: its quality is less than ideal,
And late fees are possible, There’s a credit check that it’s stolen or it never arrives,
given how easy it is to rack may factor in your income you might be unpleasantly
up several buy now, pay and other debts. “That pro- surprised by your buy now,
later plans at once. Be- tection, which can be a pay later terms.
cause these loans don’t frustrating thing for a con- Credit cards allow for
always appear on credit sumer who is trying to get easier disputes and re-
reports, future lenders may credit, actually can be a turns. If you’re only mak-
not have visibility into how really helpful protection to ing a return, the process to
many you’ve opened. stop someone from getting get money refunded to a
2. EASIER PAYMENT MAN- in over their head on multi- credit card is simpler com-
AGEMENT ple lines of credit,” deHaan pared with that of some
buy now, pay later plans.
For billing dispute and er-
ror resolution, credit card
holders have legal rights
that may include not hav-
ing to make a payment for
the item while a claim is
pending.
The law also forbids credit
card issuers from charging
multiple late fees for the
same missed payment. q