Julie Morgan

The New York Fed says Americans' credit card debt has topped $1.28 trillion.

But we aren't talking about credit cards today.

We're talking about that option you have when you buy something online, and it allows you to choose how to pay.

Credit or debit cards are always welcome.

Some merchants also allow you to use an account that is built into your phone, like Apple Pay.

Still others offer the option we're focusing on today.

Buy now, pay later, using Affirm, Afterpay, Klarna, or PayPal to name a few.

Those companies allow the consumer to split their payments into smaller amounts, zero interest, no credit check.

Usually, the set number of payments is four with no interest, but if you need more time, you could be hit with interest, and the companies show you how much up front.

So how do they make money?

The retailers.

The Federal Reserve Bank of St.

Louis says the revenue for the firms and Klarna's of the world comes primarily from the fees they charge retailers for using buy now, pay later services.

It notes the fees are often higher than those charged by credit card companies, but retailers are willing to pay these fees to increase sales.

So something must be working.

Buy Now, Pay Later is an option for regular everyday purchases like groceries.

You can even pay for a vacation over time.

Not to mention something that has been on repeat in my news feed for the past couple of weeks.

Rent Now, Pay Later.

Yes, you can now split your rent into two payments.