Shop Online? Let’s Talk Online Credit
Online credit options such as Afterpay and FlexPay offer …
- Pay in 4 payments. Shoppers split their purchase into four equal payments to be paid every two weeks with the first payment due at checkout. Installments are interest-free but the company charges a late fee if the payment cannot be processed.
- Pay in Full in 30 days. Instead of paying at checkout, shoppers have 30 days after the item has shipped to pay for the purchase.
- A traditional loan option with terms that range from 6 to 36 months with annual percentage rates of 0% to 29.99%.
Online credit may be a good option for you if…
- you need to buy a big-ticket item. If you can save enough to make on-time payment(s), this is a way to get your item now and pay later.
- you are new to credit and do not qualify for a credit card. It’s easier to qualify for than a credit card since there is no minimum credit score required.
- you have a credit card but don’t have a high credit limit. Taking a loan is better than maxing out a credit card which can lower your credit score with penalty interest rates.
Online credit may not be a good option for you if …
- you want to build credit. Online credit companies may not report on-time payments to the credit bureaus and may report only missed payments.
- you pay only the minimum on your credit cards. If you don’t have the money to pay down your credit cards, it’s not a good idea to take on additional debt.
- you have a hard time keeping track of your balance. When you choose a payment plan, the company automatically bills your debit or credit card, meaning it’s easy to overdraw. You could be charged a fee or the loan could be considered in default if you are unable to cover the payment. Not to mention the non-sufficient fund (NSF) charge from your bank.
If you are considering buying a house …
Online credit options are technically credit liabilities. If you have a purchase you’re still paying for, at the time you apply for financing, a lender may see this an ongoing liability and factor in your payments as an ongoing monthly expense. If you’re planning to buy your first home, pay off any outstanding amounts and do not use online credit again. Also, when an online credit service reports negative activity to the credit bureaus, it will appear on your credit report making
it more difficult to get your home loan approved.