The markets dropped last week as the Federal Reserve increased interest rates by another 0.75%. While this was largely expected given the higher-than-expected inflation numbers that were reported last week, stocks declined. We’re down just over 20% year-to-date, back into bear market territory (a decline of 20% or more), but still ahead of June lows. Remember that, if you are still working, you are buying on sale. Ignore the sinking feeling in the pit of your stomach and stick to your plan.
Given the crunch caused by rising prices, many buy-now, pay-later services may seem appealing. With all of these, it’s important to read the fine print. Klarna is a fairly new option, offering services for both in-person and online purchases. There are some good things about the service: you can pay in four payments with no interest (1/4 down, then three additional payments), earn rewards for using it, and the app will even track prices for you on items that you have saved. Beyond the traditional four-payments with no interest, you can establish payment terms of up to 36 months. You can also have virtual credit card numbers, which can reduce your risk of fraud and allow purchases without a credit card.
The bad side is that late payments are reported to the credit bureaus and will affect your credit score, while on-time payments are not reported and do not help you build credit. If you have a late payment, there is a fee of $7 for the four-payment plans, and $35 for the longer-term plans. The interest rate on the longer-term plans is 19.99%, more than most credit cards.
The ugly? Klarna’s terms of service show that you are giving them access to your email account[1]. Their auto-connect service scans your email multiple times a day and looks not just for Klarna-related emails, but other things as well, including health, religion, and other personal information.
Your best bet is to stick to your budget. If you can’t afford to pay for it now, wait until you can. Typically, when something on the internet is free, it means you – and your data – are the product.
Your action item this week is for parents of high school seniors and college students. The FAFSA, or Free Application for Federal Student Aid, opens on October 1st. Gather your needed information now and be ready to tackle this over the weekend.
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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.
[1] https://cdn.klarna.com/1.0/shared/content/legal/terms/0/en_us/emailconnect/