MoneyDon't Waste Your Money


'Buy now, pay later' is surging in popularity, but you could regret it

Millions of shoppers signing up for interest-free payment plans
Consumer Prices
Posted at 4:00 AM, Dec 14, 2022

"Buy now, pay later" plans are surging in popularity this holiday season, with cash-strapped consumers no longer receiving stimulus checks and expanded child tax credits to help with the bills.

But this hot trend does come with some risks, as some shoppers are discovering.

Paige Allen is among those trying to finish up their holiday shopping right now. But with money tighter than it's been the past two years, she's using "buy now, pay later" to help fill her family's stockings.

"It helps around Christmas time," she said, "because it gives you time to figure out what you want to buy and pay for it after the holidays."

Adobe Analytics, which tracks online shopping data, found more shoppers are turning to "buy now, pay later" programs this holiday season than ever before. The week of Cyber Monday, for example, "buy now pay later" orders were up 85 percent compared to the previous week, it found.

While these plans provide a lot of flexibility, financial experts are concerned that some shoppers might go overboard.

Sarah Foster of Bankrate.comsaid younger adults, Gen-Z-er, and millennials are more likely to feel pressured into spending more money than they're comfortable with.

"It makes a big purchase seem like a more affordable option," Foster said.

And younger people are not only using it for gifts, Foster said, but to cover travel costs.

"Airline tickets, gasoline, prices of hotels, all of that, are up from last year," she said.

This is making many travelers put that airline ticket on a pay-later plan.

Risks if you fall behind on payments

"Buy now pay later" programs separate big-ticket items into smaller installments, often interest-free. So you can buy something now and pay for it over time without facing a credit card's 16 to 20 percent interest.

But if you spend more than you can afford and miss those payments, you could rack up:

  • Late fees.
  • Deferred interest.
  • Other penalties.

Foster said you need to know what you can spend without tapping into your savings. And she urges shoppers to think about priorities.

If traveling to see your family is most important, she says you may want to forgo the gifts.

"There's no shame in talking about it with your loved ones," she said.

Allen is just happy she can stretch out some payments without paying credit card interest.

"It is helpful for a lot of people, so you get a lot of your shopping out of the way," Allen said.

Just know the risks if you fall behind on payments so you don't waste your money.


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