TULSA, Okla. — Back-to-school shopping often puts a significant dent in family budgets, leaving many parents to choose between credit cards or buy now, pay later plans when cash is tight.
From backpacks and binders to crayons and clothes, the costs add up quickly for parents preparing their children for the new school year.
"Well, it's expensive," said Miranda Gallaugher, a back-to-school shopper.
To spread out these costs, many parents turn to credit cards or use in-store or online retailers' buy now, pay later plans.
"Bankrate data shows that 1 in 3 Americans have used Buy Now Pay Later, but some of those users do report overspending or even regretting the purchase," said Katie Kelton, a Bankrate credit card analyst.
"Sometimes it's necessary," Gallaugher said.
The convenience of these payment options makes them increasingly popular, especially during the back-to-school shopping season.
"Buy now, pay later can seem like a good deal when you're checking out online, or even if it's offered in store because the payments are smaller and you still get that product right away," Kelton said.
Understanding the differences between these payment methods is crucial for making smart financial decisions.
"The differences between buy now pay later and a credit card is that buy now pay later is more of a small personal loan. It might be interest free, it might not. A credit card is a revolving balance that you pay off either all at once or over time," Kelton said.
Before using either option, consumers should consider whether they can handle paying off the bill before interest charges begin to accumulate.
"I would just say to be careful here because generally if you need to go into debt to pay for something relatively small, it's possible that item doesn't really fit into your budget," Kelton said.
Even with back-to-school necessities, parents should evaluate what their children need immediately versus what purchases could be delayed.
According to Kelton, there are three scenarios when using buy now, pay later plans makes financial sense:
- If it offers 0% interest and you can pay it off during that promotional period
- For major purchases like household appliances, if you can make all payments on time and in full
- When you can't qualify for a credit card but need financing
"It's also a more effective way right now to build your credit score," Kelton said.
While buy now, pay later plans were previously less strict about reporting late or missed payments to credit bureaus compared to credit cards, that's changing.
"So it is really important if even if you commit to a 0% interest rate with buy now pay later, you do need to make those payments on time and in full so you don't hurt your credit," Kelton said.
For credit card users, caution is advised when the card charges interest on unpaid balances. Financial experts recommend thinking twice before purchasing items you can't pay off by the end of the billing cycle.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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