Use Care with Installment Payments
Do you Remember Layaway?
As a child, I remember the ability to put things on layaway. It was a way to make larger purchases and pay a little at a time. That can be helpful to a lot of people when it comes to spending and budgeting. Lower-income families sometimes use it for big purchases like holidays and other special occasions. You could take a little from your check and pay down your debt. I know my mom may have used it at some point, but I don't have all the details. Was there a fee? Did she pay interest? I don't know!Convenience Comes at a Cost
With layaway, you didn't get the item until it was paid off. These days, many services allow you to take the item home and pay on it later. This comes at a price.A Word of Caution
While it is maybe helpful to break a big purchase into smaller payments, do so with caution. Often, there are some heavy penalties for not making payments on time. Be sure to read the fine print.
I was recently online doing a little window shopping. I selected an item and was taken to the product details page. On the side, I noticed the price of the item and also an option to make the purchase using 4 installments using a 3rd-party service.
I mean, I hadn't even reached the shopping cart yet, and there they were trying to "sell" me a service.
Paying the Cost for Installment Payments
Out of curiosity, I clicked the link to get more details. It boasted zero interest and no fees when you pay on time. Upon reading the payment agreement, the service would automatically debit your method of payment every two weeks for each of the remaining 3 installments. The catch was that if even one payment was late, a late fee capped at 25% of your original purchase price may be applied. Ouch! 😟 First off, 25% is quite high; second, the fact that you may have made 2 timely installments doesn't even matter because you're still paying a fee on the original balance, not the current.For Your Consideration
- Always Read the Small Print.
- Avoid Rent to Own.
- Avoid Pay Day Loans.
- If you can afford the full payment, make the full payment.
- Use Caution with Installment Payments - Pay your bills on time!
- Instead of using a service to pay in installments, create your own savings fund and only purchase the item once fully funded.