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Need help paying for holiday gifts? The Affirm app may just be the best option

Buy Now, Pay Later services helping with higher ticket items. But should you use one?

CLEVELAND — Have you ever seen the price of a Peloton bike? That'll raise your heart rate.

And Chamblee Smith didn't want to rack up debt to buy one

"I was raised as someone who, you don't buy something unless you can pay it off right then because of interest," she said.

But she found another option, a company called Affirm. It’s one of many Buy Now, Pay later services. 

"The math actually worked out. I could pay off the Peloton interest free in a year, and it was still cheaper than my gym membership," she pointed out.

Yes, you heard right. Interest free. And there are some other big benefits.

Unlike layaways, you get the product right away. And there are no hard credit checks to apply so, it won't impact your score.

"A lot of them are short-term loans,” explained Matt Schulz, Chief Credit Analyst from Lending Tree, an online lending marketplace. “Some of them are simply 4 installment payments made every two weeks."

It's a win-win for businesses as well.

Angel Competition Bikinis uses a service called Sezzle

CEO Karah Jones says, “If someone doesn't complete a payment, Sezzle takes the fall on it. We pay Sezzle a higher merchant service fee for every transaction that goes through Sezzle. That covers that for them.”

It’s 6% percent high…double most credit card fees. But for Jones, it works.

"I really do think we end up on top because we could've lost a lot of sales without offering some kind of payment plan," she explains.

Pay close attention though, to the terms of these plans.

A study by Ascent, a personal finance website, found more than a third of customers missed a payment while using Buy Now, Pay Later services

And that's when you could get hit with high late fees and or interest.

“Some of these services will even say that if you are late, or you don't pay your balance in full within that period, that you may never be able to use that service again,” Schulz points out.

But for Smith, pedaling away with a Peloton was worth the risk. "I'm sure if I saw it in the future on an appliance or some big splurge that I wanted to do, I would definitely consider it," she said.

Another option, if you can get one, a credit card with an interest free promo rate. Many offer cash back or rewards, plus protection if there's a problem with the product.

But be aware, if you don't pay your bill in full by the end of the promotion, you'll be charged all the back interest.

Also, the minimum monthly payment often isn't enough to pay off the purchase.

So you have to pay a lot more each month to avoid getting hit with interest, often in the twenty percent range, when the promo deal expires.

Schulz warns, “It's really upon you to make sure, no matter how you're going to pay, that you can afford it, and that you're not going to create a bunch of debt for yourself."

Bottom line, you need to be honest with yourself about your payment history. But, Buy Now, Pay Later services are a great option, especially for people who need to build credit.

Here are links to some of the larger Buy Now, Pay Later services:

More from Danielle Serino:

Editor's Note: The below story aired on November 27, 2020

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