The popular food delivery app, DoorDash and Klarna have partnered up to give people more ways to pay for meals, groceries and more. Thanks to a new deal they’ve created together, people who order food on DoorDash can pay the full bill immediately, opt to pay later over a period of time (with interest) or pay in four installments over time — the question is, does this help or hurt people’s personal finances?
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“[These] flexible payment options are essential to meeting our customers’ needs,” said Anand Subbarayan, DoorDash’s head of money products.
But financial guru Dave Ramsey has a different opinion. Here’s what he said about “Eat Now, Pay Later” plans.
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The average U.S. consumer owes $105,056 in debt, according to Experian data. The average person also pays about $1,224 in monthly debts.
Add on to this the concept of “eat now, pay later” — or deals like what DoorDash and Klarna have going on — and you’ve got the potential for a serious debt trap.
On a Facebook post, Ramsey called this feature stupid and said companies will make a ton of money off of “broke people.”
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The idea of getting your food delivered and paying later (like after you get your next paycheck or pay the rent) might seem great on the surface. But when you look at the bigger picture, you’re just delaying the inevitable.
Say you get delivery for $60 and go with Klarna’s “Pay in Four” payment option. You’ll pay $15 upfront and pay the remaining $45 over three equal installments. That’s four months of payments for one meal.
But what if you purchase another meal while still paying off the first one (and use the same Pay in Four payment option)? You’ll now have to juggle the first meal’s payments along with the second.
If you’re delaying payments now because of finances — which is often the case — then you could end struggling to come up with enough cash later on. Plus, Klarna charges up to $7 in late fees (capped out at 25% of your initial order value). So, if you miss a payment for any reason, you could end up paying even more.
What To Do Instead
Eat Now, Pay Later plans like the DoorDash and Klarna partnership could hurt people financially. But try not to stress out if you’ve already used these services before.
In the same Facebook post, Ramsey said he’s not mad at people who have fallen for this, but urged people to stop and get on a budget instead.
If making a budget is stressful, try using a free app (like Rocket Money) that does it for you. Having a budget can also give you a better idea of your expenses and help you find ways to free up room for those debts.
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Sources
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Dave Ramsey, Facebook.
This article originally appeared on GOBankingRates.com: Why Dave Ramsey Says ‘Eat Now, Pay Later’ Will Keep You Broke
