What shoppers should know before you 'Buy Now, Pay Later'

PHILADELPHIA (WPVI) -- In a recent Consumer Reports survey, 21% of Americans said they'd used "Buy Now, Pay Later" at least once. But before you click, there are some things you need to know.

Many retailers from Apple to Amazon offer it, as do some restaurants and even grocers. But if you're not careful, it can end up costing you in fees, interest, and security.

With just a few taps, you can pay for a purchase, whether big or small, in multiple installments.

"Sometimes there are fees and interest embedded in those installment payments, but sometimes there's not," said Kimberly Palmer, a personal finance expert at Nerd Wallet.

If you choose to pay in four installments, there's usually no interest or fees. But longer term, monthly plans can come with interest rates of as much as 36%.

"It is still a form of debt, and you still have to pay it off," said Palmer.

Plus, late fees can range from $5 to $8, so notify the company in advance if you can't pay on time because you may be able to reschedule a payment.

And CR advises taking screenshots of each loan term page before you hit 'accept.' This could help if you need customer service in the future.

"It can be overwhelming if you suddenly have a lot of 'Buy Now, Pay Later' payment plans that you have to pay up. And so you do want to be careful about taking on too much," said Palmer.

Also, be aware of issues with safety, privacy, and transparency with 'Buy Now, Pay Later' apps.

"There are questions about these loans' lack of critical consumer protections. So, we tested some of them, to check how safe they really are for consumers," said Lisa Gill of Consumer Reports.

Consumer Reports analyzed eight popular apps and coming out on top was PayPal, scoring 89 out of 100 with high marks in fraud protection and security practices.

CR warns some other apps leave a lot to be desired. Zilch was one of the worst performers, getting a 70, in CR's privacy control tests - although the company says it complies with state and federal data privacy laws and gives users the ability to opt out of certain data collection.

A low or no interest credit card might be a better option for a lot of consumers. They provide better protections on purchases, it's easier to get your money back on returns and you can earn points to help you save money later.

Fraud and identity theft are also concerns when using these apps.

"You should make it a habit to regularly check your 'Buy Now, Pay Later' account to monitor for fraudulent charges and to review all transactions and email notifications from your provider," said Gill.

If you do run into problems using a 'Buy Now, Pay Later' app, and working with customer service leads to dead ends, CR recommends contacting the Consumer Financial Protection Bureau.