Programs

Buy now, pay later Programs may have a cost

Image of article titled Buyers Beware: Buy-It-Now and Pay-Later Programs May Come at a Cost

Photo: Andrey_Popov (Shutterstock)

It is said to be the most wonderful time of the year. But there’s nothing wonderful about the holiday season if you’re short on cash. While inflation has the cost of everything from gas to groceries sky, the idea of ​​a new TV appearing under your Christmas tree may seem completely out of reach.

But these days, the popularity of Buy Now Pay Later (BNPL) services like Afterpay, Affirm, and Klarna are growing, making big-ticket items more accessible to the masses. They give consumers more time to pay for their purchases by dividing the cost into smaller payments. If you pay on time and in full, these payments are often without additional interest. And some consumers find the BNPL approval process easier than trying to get a credit card.

A August 2022 The Consumer Reports survey found that 28% of Americans paid for goods like clothes, electronics and appliances with some sort of buy-it-now, pay-later program, up from 18% in January. And almost 90% of users said they were somewhat or very satisfied with the service and would probably or definitely use it again.

It probably won’t come as a surprise that young consumers are the most likely to use BNPL for their purchases. Consumer Reports’ January 2022 American Experiences Survey found that among adults aged 18-29, 26% used BNPL, compared to just 10% of those aged 60 and over. And when it comes to race, the survey found that 40% of African American BNPL users have used it at least six times, compared to 29% of Hispanic users and 27% of white users.

But while BNPL may give you a bit more time to refund your purchases, the folks at Consumer Reports are here to warn people that it may come at a cost. Their research revealed that 28 percent of people who have used a BNPL service report having at least one problem, including being overcharged on a purchase and having trouble returning unwanted items and getting refunds.

They also want to warn people against using BPNL in risky ways, such as using credit cards to make payments or having more than four BPNL purchases in progress at a time. Fifty percent of survey participants who had missed at least one payment said it was because they expected to have the money but were unsuccessful. And of those who missed one or more payments, 21% said their debt was passed on to a collection agency.

As you do your holiday shopping, be sure to read the fine print of any BPNL service you are considering using. And when in doubt, just pay cash.