You’re broke and tempted to buy now, pay later. Be clear on what you’re signing up for

The dog hair is piling up and you need a new vacuum, but you don't have the cash. Should you whip out your credit card? You could transfer money from your line of credit, right? What if you clicked that tiny little button on the checkout screen to spread your payments out over the course of six weeks - you can afford that, maybe?

Canadians are signing up for buy-now-pay-later (BNPL) programs in droves, including for groceries. (Yes, you read that right.) Some banks are allowing consumers to pay for groceries through installments on their credit cards, just like old school layaway plans.

The benefit to cash-strapped people is not having to pay all at once, which leaves more funds available for day-to-day essentials, such as child care and gas, or just-in-case savings that have become more important to have than ever, given the current state of layoffs and economic turmoil. And, many six-week BNPL programs offer zero interest.

The drawback is additional payments that many consumers can't actually afford, even with low-to-no interest costs.

Here's the deal with these buy-now-pay-later options: they are a form of debt.

So, get informed before you sign on the digital dotted line.

Who are the suppliers, players?

Popular BNPL companies you'll see even more this holiday season are Affirm, PayBright (now owned by Affirm), Klarna, Sezzle and Afterpay.

Most have a pay-in-four" payment option, where you can pay over the course of six-or-so weeks, and some offer a loan-style payment option, where you can pay monthly, for a longer duration. The initial payment is often 25 per cent of the total purchase price and the difference in costs are distributed across the remaining payments.

Pay attention to these factors

• All-in cost: When considering a BNPL option, you need to look at the total cost of the purchase, not just the low payments. Some BNPL companies charge administration fees to set up the plan and processing fees when you make a payment. Late payment fees and penalties for missed payments will range. Read these tiny details carefully! It might turn out that the television you want to finance is more like $700, not the $600 you would pay if you paid for it up front.

• Interest rate: For small purchases paid over a matter of a couple of weeks or months, buy-now-pay-later retailers may offer zero per cent interest and no fees. For larger purchases paid for over six to 60 months, retailers set the interest rate for these, which can sometimes be less than average credit card interest rates and can go up to 30 per cent - yikes!

• Credit score: Credit checks are conducted for bigger purchases paid through a BNPL plan. When this happens, a hard" inquiry is typically made on your credit file, and that can affect your credit score. If you're on a mission to increase your score - maybe you're planning to buy a home in a few years - be careful not to agree to too many hard credit checks. Soft credit checks are common with BNPL plans for lower cost items.

• Impact on your budget: Can you afford to make the payments? What's the frequency? Do you have to trim back from other categories of your budget? How does the purchase actually add value to your life? (For example, will you be able to use that new computer to generate freelance income?) Is the purchase putting you at risk of not being able to afford essentials? Will you still be able to save for retirement?

Not into budgets? I hate to break it to you, but you need to make friends with the budgeting process. Otherwise you really won't know if you can actually afford to purchase what's on your list.

Let's step back and really be smart about this; what's worth going into debt for, and what's not?

Is holiday shopping worth it? Probably not. I get that the social pressure to spend on gifts, parties, Christmas lights, booze, makeup and more is extreme. But, sacrificing your financial wellness to keep up with unrealistic expectations is a bad deal.

Make your shopping list in advance, trim it by half, and only buy what you have the money for. Tap into the second-hand market, make presents, borrow outfits from friends and focus your attention on free activities. Use up gift cards and loyalty points. Save up from each pay to put toward the holidays. And, most importantly, set expectations with your family and friends about spending. Chances are you'll discover many households will be relieved to know that spending expectations are lower this year.

Is essential spending worth it? Probably. Inflation and rising rates are making it impossible for some households to afford the basics. If you're staring at decisions of whether to water down the baby formula or the spaghetti sauce, or whether you can continue to drive for your work when the tires are bald, it's OK to tide yourself over with a BNPL option. Just be informed of exactly what you're signing up for, and make a clear plan to afford the payments!

A good deal you can't actually afford isn't actually a good deal.

Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star. Follow her on Twitter: @lesleyscorgie