BBB Tip: Holiday budgeting with buy now, pay later services

(BBB) — With some consumers planning to pull back on spending this holiday season, BBB has tips for celebrating on a budget.

Read more or hear from Better Business Bureau Regional Director Pamela Hernandez below:

A majority of respondents to a recent Deloitte survey said they would either be looking for deals (89%) or trading down to lower-cost brands (77%) during their holiday shopping this year. This was true across generations, with the exception of Gen X respondents, who said they plan to spend slightly more.

Whether you’re looking for a great deal on gifts or planning to spend less on decor, there are lots of budget-friendly ways to celebrate the holiday season. You may decide to shop at a new store, look for thrifted or pre-owned gifts or decor – or you may be one of 50% of shoppers who plan to use a Buy Now, Pay Later (BNPL) plan.

If you’re changing your shopping habits this year to try to cut back, don’t skip the research. Always check for red flags before you buy something from a new place. Make sure you read policies for returns, refunds and Buy Now, Pay Later plans for any business.

BBB’s tips for a budget-friendly holiday season

How do I make a holiday budget?

• Start with the basics. Start by reviewing your income and subtracting essential monthly expenses like rent, utilities, groceries and debt payments. Decide how much you can realistically spend on gifts, travel, parties and other holiday costs, and set a clear spending limit.
• Prioritize debt. Review any outstanding debts, especially high-interest debt. If you can’t pay it off before the holidays, reduce spending and focus on low-cost or free ways to celebrate to avoid adding financial stress.
• Consider rising prices. Inflation can increase the cost of gifts, groceries and other holiday essentials. Compare prices before buying, adjust your budget where necessary and consider scaling back gift-giving to stay on track.
• Make a plan for gifts. Create a detailed gift list with every recipient, set a price range for each and brainstorm ideas in advance. This helps prevent impulse purchases and ensures you stay within your overall budget. Save money by taking advantage of Black Friday, Small Business Saturday and Cyber Monday deals, plus loyalty points or cash-back programs. Compare prices, look for free shipping and bundle purchases where possible.

What should I check before I shop somewhere new?

• Research before you buy. Use BBB.org and customer reviews to see the business’ track record, any complaints and whether they are BBB Accredited. Don’t rush – take your time and read the fine print before submitting an order.
• Get a handle on prices. Scammers often offer the most popular products of the season at extra-low prices. Shop around and get an idea of the typical price range for the items you have in mind. If the deal looks too good to be true, it probably is.
• Beware of fake websites. If you’re shopping on a new website, check the spelling of the URL, watch for bad grammar and check the contact information for a physical address and phone number.

What do I need to know about buying secondhand items?

• Check reviews of the seller and the platform. Use reliable buy/sell platforms with good reviews, and if possible, check reviews of the seller before making a purchase. Search on BBB.org to find BBB Accredited Businesses.
• Set price alerts on saved items. Want to snag that holiday outfit you’ve been eyeing at a lower price? Some online secondhand retailers allow you to save items and set alerts for price decreases or sales, so you can get back to your to-do list and get notified when it’s time to buy.
• Inspect listings closely and ask questions. Look for wear, stains and tears. If you’re looking online and the photos or descriptions in the listing are not giving you enough information, ask questions so you can be confident in your decision.
• Ask about returns or exchanges. Secondhand stores or resellers might have different return policies than a big box store. Don’t assume – ask!
• Document your purchase. Make sure to get a receipt from the seller or platform. Immediately photograph your items upon arrival (before unwrapping) to capture any damage that is on the item. If you can return the item, you’ll have proof to dispute.

What should I know if I’m considering a Buy Now, Pay Later plan?

• Consider it a loan. BNPL is essentially a loan – even if you won’t pay interest, you can still fall victim to overspending or late fees. Ask yourself if the total price is more than you can actually afford and make your purchase decision accordingly.
• Stick to your budget. Bi-weekly or monthly payments could have a big impact on your budget, even if the payments seem small. Double check that the payment plan fits within both your holiday budget and your long-term budget.
• Read the fine print. Read the financing agreement in full before signing on. Make sure you know:
  • What company is financing
  • How long the plan lasts and how many installments you will pay
  • How they handle late or rescheduled payments
  • Whether they charge an interest rate
  • If there are any other fees
• Know your rights. BNPL lenders must investigate disputes that consumers initiate, issue refunds for returns or cancellations, and provide periodic billing statements.

Consider alternatives. Some credit card companies offer 0% APR cards or “pay over time” options that provide the flexibility of BNPL without losing the protections or rewards from spending with your credit card.