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Buy Now Pay Later With Your Smartphone

MoneyWise

Christian talk radio with Rob West

June 30, 2022

Proverbs 22: 3 tells us: The prudent sees danger and hides himself, but the simple go on and suffer for it. Today we’ll talk about a new danger that’s making it easier to go into debt. Buy now, pay later offers can be tempting. Unfortunately, they often entice borrower’s to agree to exorbitant interest rates. There’s a new player in the buy now, pay later game: Apple Pay And that means you’ll be able to buy something that you don’t have cash for just by waving your smartphone. It’s what you might call an attractive nuisance, like a swimming pool without a fence around it. Apple will now allow consumers to pay for purchases in four payments over six weeks, and since Apple is a 500-pound gorilla in financial technology, other so-called fintech providers like Affirm and PayPal are expected to follow suit. Buy now, pay later popularity was already increasing due to COVID. By some estimates, a majority of shoppers now see paying in installments as a good thing. According to Experian, an astonishing 4 out of 5 shoppers have used buy now pay later offers, and a majority say it may replace other ways they purchase items. The fact is, many will end up with several buy now pay later loans, lose track of their payment dates, and sink into debt. THE FINE PRINT One of the big problems with buy now, pay later is that most people don’t read the fine print. But as they say, the devil’s in the details. There’s usually a statement in legalese to the effect that if you don’t pay off the entire balance by the end of the grace period, the lender will tack on all of the compounded interest you would have been paying - and at a very high rate. That means you haven’t saved anything, because now you owe not only for the purchase but also those delayed interest charges, as well. True, you could take the offer, get the merchandise, and then pay off the entire balance before the grace period ends, paying little or nothing in interest or fees. But will you really do that? Do you have the money to pay off the complete balance in your savings or checking account? Or will you be able to get it before the grace period runs out? In far too many cases people doing the buy now pay later deal don’t pay off the balance in time. And they end up paying more in interest than what the item cost in the first place. Here’s an example. A furniture store offers a buy now pay later deal so you purchase a couch for $3, 000. And yes, people do that. But now for whatever reason, you don’t pay off the balance in time. So you begin making the minimum monthly payments often at 20% interest or more. In the end, you might pay as much as $4, 800 dollars in interest alone. So the couch really costs you almost $8, 000 dollars! 2 WAYS TO AVOID THE TEMPTATION OF BUY NOW PAY LATER There are two ways to avoid the temptation of buy now, pay later. One of those ways is practical, the other is spiritual. First the practical . Say you really do need a couch. That doesn’t mean you have to buy a new one. Instead go to the Salvation Army, Goodwill or some other thrift store and buy a decent used couch for maybe a few hundred dollars or less. You can look at online classified ads, too. Now you’ve got your couch and it’ll be fine for a while, but you still want something a little nicer. That’s fine, so start saving for the couch you really want. Discipline yourself to put that money away every month, perhaps with an automatic transfer from your checking account. Once you have the money saved, you can pay cash for the couch of your dreams without paying a nickel in interest. The spiritual way to avoid these pay later offers is to search your heart for why you feel discontent. If you’re willing to consider one of these dangerous offers, odds are you’re not content with God’s provision and you feel you should have more. Pray the Holy Spirit will give you discernment and the peace that comes with truly trusting God to provide for your needs. Pray that your will would become His will. Mark 11 assures us, Therefore I tell you, whatever you ask in prayer, believe that you have received it, and it will be yours. On today’s program, Rob also answers listener questions: ● What factors should one consider when thinking about buying a home? ● What should your top financial priorities be when approaching retirement? ● Is it possible to negotiate a settlement on a student loan?

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