Benefits and dangers of 'buy now, pay later' plans for holiday shopping

If you're worried about having the cash to buy holiday gifts this year, more and more retailers are now joining the trend of offering buy now, pay later options.

However, you need to be aware of the possible financial pitfalls when it comes to this option.

Buying now, paying later is convenient and allows you to make purchases and break up the payments into smaller, more manageable dollar amounts. But you have to realize it's like financing your purchase or taking out a loan that could come with a high-interest rate and fees.

Carlos Medina of ScoreSense, which offers credit monitoring, says "Consumers have to read the fine print because these loans can go anywhere from 0% with no charge at all, and depending on the number of months to up to 30% and sometimes even higher."

Medina suggests before agreeing to a plan, take a look at the terms and conditions. Most retailers offer it through a third party that will check your credit. It could impact your credit score, especially if you miss a payment.

"You could have default fees and you obviously then have it reported to the credit bureaus," Medina adds.

Also know if you want to return the product, while you will get back what you paid, typically you won't be credited for the interest or fees that you paid.
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