Lauren Schwahn
Appearances
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
You don't have to wait until the full balance is paid.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
That depends on the terms of the specific plan that you sign up for. Layaway purchases, those usually take a few weeks to a few months to pay off, and you get the item whenever you make that last payment. Buy-now-pay-later purchases can take a few weeks, months, or even years to pay off. Usually the most popular plans follow what's called a pay-in-for model.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
And that's where the total cost is divided into four installments due every two weeks, and they're typically paid off in about six weeks' time. With Buy Now, Pay Later, though, you still get the item that you're purchasing right after checking out, regardless of how long the repayment period lasts.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
One benefit of layaway is that it's not a loan, so you aren't required to take on debt to make the purchase. You don't need a credit check to get on a layaway plan, and there's no direct effect on your credit. If you can't complete the layaway payments, it's just that you won't get the item, and you may have to pay a fee, but it's not going to go to a debt collector or anything.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
The big benefit of Buy Now, Pay Later is that you don't have to wait to get the item. It's yours right away. You don't have to pay the full price first. Depending on the plan, you may not have to pay any fees or interest charges. Another advantage is that Buy Now, Pay Later plans are more widely available than layaway plans.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Credit cards also help you spread out the cost of a purchase, but most will charge interest on your unpaid balances. With layaway and buy now, pay later, you'll either pay no or low interest in most cases. But unlike credit cards, on-time layaway and buy now, pay later payments aren't reported to the credit bureau, so they won't help you build credit.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
But by using layaway or buy now, pay later, shoppers may also miss out on the cash back and rewards that most credit cards offer.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
You're right. Layaway was a lot more common decades ago, and there have been some periods of resurgence more recently. Amazon had a layaway option actually just earlier this year, but most of these plans have been phased out in favor of buy now, pay later.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
These days, you're more likely to find layaway at businesses like local furniture stores, jewelers, and pawn shops instead of the big name retailers and department stores. Some larger companies still do offer it, or they might sometimes bring it back just for a short period of time, especially around the holidays.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
So if you are interested in using layaway as you're doing your holiday shopping, keep an eye out for information from those retailers when you're browsing their websites.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Yeah, honestly, you can find it just about everywhere now, but especially those big box stores and retailers that specialize in things like apparel, electronics, beauty, and home goods.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
I think part of it could be that this generation, like many folks right now, is feeling the sting of the high cost of living. And many Gen Zers are young adults, you know, those late teens and early 20s, and they may not have established credit or as high of an income as some people in older generations might.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
I think BNPL is appealing because in most cases it doesn't require a hard credit check and it can be easier to qualify for than a credit card. Also, credit card purchases can be more expensive if you don't make the payments on time because of the interest. So no or low interest buy now, pay later plans might seem like the more financially friendly option.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
A layaway plan is not going to directly impact your credit for better or worse. These plans, as we mentioned, don't require credit checks, so there won't be a hard inquiry on your credit report and your score won't take a hit. The payments also don't get reported to the credit bureaus whether they're on time or not. So using layaway responsibly isn't going to help you build credit.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
But there's kind of a catch if you use a credit card to make layaway payments that could indirectly impact your credit since credit card payments are reported. So if you make them, it could help build your credit, but if you miss them, it could also knock your credit. Most buy now, pay later plans similarly don't require a hard credit check or report the on-time payments to the credit bureaus.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Some will report positive payments or they might allow you to opt into that feature. So there is a chance those could help build your credit history, but it's not guaranteed. Buy now, pay later has, I think, a bigger risk of hurting your credit if you have late payments.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
The account might eventually be charged off, which means it's written off as a loss, or it might be sent to a debt collector, which could be reported to the credit bureaus and ding your credit.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
It depends on the plan, but that's why it's really important that you read the terms carefully first. With layaway, there could be a cancellation fee or there might not be a fee at all. But in either case, you wouldn't get the item if you don't finish making payments. Some BNPLs charge fees or interest for things like rescheduled or late payments, especially the longer term plans.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
And there's also that risk of a negative mark showing up on your credit reports.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
One thing to think about is how urgently you need the item. If it's something you need right now, then you can rule out layaway because you have to wait for that. But you can also compare fees and interest rates to get a better sense for how much each option may cost you, especially if you can't pay on time.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
If you're trying to build credit, a credit card is probably going to be the best option for that. But I would also say consider whether none of these three options are the right choice. If you can't afford the item and it's not something you absolutely need, you probably shouldn't buy it.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Absolutely. Buy Now, Pay Later is becoming so much more widespread, to your point, for purchases big and small. The other day, I went to a bakery in my neighborhood and saw that they accept afterpay, which surprised me.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Yeah, so I think it's safest for people to not have more than one buy now, pay later loan at a time. But if someone is going to use them more frequently, setting due date reminders can be a huge help or even setting up automatic payments.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
If you do use auto pay, it's really important to make sure you'll have the money when payment comes due so that you don't risk getting charged something like an overdraft fee or interest depending on your payment method.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
I would emphasize again how important it is to read the details carefully if you're considering a layaway or buy now, pay later plan, just to make sure that you understand what you're getting yourself into. If you choose one of these plans, keep track of the payment due dates. And also, I think there's
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
something to be said if you really want something, but you can't afford it without financing, explore cheaper options first. There might be a less expensive dupe of the item, you know, something that looks the same, but isn't maybe from as high end of a brand. Or maybe you could find something secondhand.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
There are local buy nothing groups you can join on Facebook and other sites where people often give away or trade some really great stuff. And a lot of retailers also sell open box items at a discount. There's a lot of creative ways to save money around the holidays.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Thanks for having me.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
No problem.
NerdWallet's Smart Money Podcast
Buy Now, Regret Later? Decoding BNPL and Layaway Payment Plans
Layaway typically is where you make a down payment on a purchase and pay the remaining amount over time. The retailer holds that item until you finish paying for it. Buy now, pay later is a loan that splits the cost of the purchase into a series of equal payments and you make the first one at checkout. With buy now, pay later, you get the item immediately after that first payment.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
I don't remember the exact details. I just know it didn't change too much at that point. What I remember most is that we messed up adjusting our withholding after we got married. So we ended up owing more than we expected after filing. So heed my cautionary tale.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
That's right, and I know there are a lot of myths surrounding what happens to your credit when you get married, so let me set the record straight. There's no such thing as a joint credit score or a credit report. Credit files are unique to each individual's credit history, so you're not going to inherit anything from a spouse's record.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
The only time that your partner's credit might impact your own is if you apply for a credit card or a loan together in the future, then that information would appear on both of your files. But that's also going to be the case whether or not you're married.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
One other thing is, depending on where you live, it's also possible that if your spouse refinances an existing, say, student loan after you're married, that could open you up to liability. But that's not usually the case. I want to say something about the scam situation that the listener's partner experienced real quick.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
It's important to know if you've been the victim of a scam and there's a negative mark on your credit report because of it. Like in the listener's case, a charge off, which is when you have an unpaid account that your creditor writes off as a loss. Instead of waiting for the mark to fall off your credit report several years down the road,
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
you can and should dispute that with the three major credit bureaus to try and get it corrected as soon as possible. And the same goes for if you see a negative mark that's been there longer than you think it should. So legally, most negative marks have to come off your credit report after seven years.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And I don't know if the listener's partner maybe already tried disputing that information, but if not, it's a good idea. So that's my public service announcement.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
It is possible. Again, it's going to come down to whether they decide to apply for credit jointly or separately. If they get married and apply jointly for, let's just say a mortgage, lenders will look at things like the couple's credit scores and reports and also their debt to income ratio to assess their risk.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
So if lenders see that your partner has a high amount of debt compared with their income, or if their credit is in really rough shape, that could make it harder for you to get approved or get good terms.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Well, it's great that they've already shared details about their financial situations with each other. So hopefully they won't run into any surprises there. I think that's a really good start. I think it's also important for them to talk about their financial goals and expectations so they can make sure they're on the same page.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And then from there, they can decide how to prioritize those goals and whether they want to manage their money together or separately. For example, we know the listener's partner has student debt. The couple might want to talk about whether they should both contribute to the payments and possibly pay it down faster or if they want to have the partner continue to pay it on their own.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
You know, our financial situation wasn't that complicated. So there weren't a lot of major changes at first. Neither one of us brought any debt into the marriage. We kept our own credit card accounts open. And we're also renters, so we haven't gone through the home buying process or anything.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
But I think the biggest change for us was that we opened joint checking and savings accounts so we could officially combine our income. And that just made it so much easier for us to pay our bills and to save up for our goals without having to figure out how much each person needed to contribute or having to send money back and forth.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And also being able to get on each other's health plans was a really big plus. I would say if there's anything financially that I didn't expect about getting married, it's maybe that I'm just not as stressed about money as I thought I would be. I know this sounds like a really cheesy cliche, but my husband and I have always been a good team. We share the same values. We've supported each other.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And we're both pretty responsible with money. We both work in the finance world. So I think that's been a huge help. So it's not like I expected necessarily that a switch would flip and we would suddenly start fighting about money or anything once we got married. But I also knew we were going to make some bigger financial decisions like having kids.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And thinking about managing those added costs for me was just a little bit scary. But it actually hasn't been too stressful in reality because I've had someone else to share that load. So I'll give you one example. We bought our car right after we had our first kid.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
And we just decided to have my husband do everything, put it in his name because I didn't have to bring my newborn along to the dealership. So it was a lot better that way. And my husband's also just really on top of little things. Like he calls the garbage company to sort out our auto pay issues with our bill. And he has taken a lot of those, what I find annoying tasks off my plate.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
I think it's a good idea to check in with each other every once in a while and just be honest about how things are going. Couples might want to talk about whether they're making progress toward their goals, if there's been any changes in their financial situation, and also just address how they're feeling.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Because I think obviously the numbers and details side of managing your finances is important, but the mental and emotional side is really important too. And then there are a lot of ways you can support your partner, even if you keep your finances separate. You might just want to be a cheerleader for them or you can help them research a problem that they're having or share resources.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
You know, maybe you've used an app to track your spending and you really like it and you can recommend that to your partner. So there's definitely a lot you can do and just ask, see what kind of support they need and then deliver where you can.
NerdWallet's Smart Money Podcast
Marriage and Money Myths — and Why the Economy Feels 'Off'
Happy to be here. Thank you.