Should You 'Buy Now, Pay Later' When Checking Out?
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Here's your money briefing for Thursday, September 16th. I'm J.R. Whalen for The Wall Street Journal. You've probably seen advertisements or offers of the online checkout page for so-called buy now, pay later programs that allow consumers to pay for products in installments.
This is a $100 item. Pay $25 a month or $25 every couple of weeks with this payment provider, with this buy now, pay later program. And suddenly the consumer thinks, huh, $25, that's totally manageable for me every couple of weeks or every month.
So how do these programs differ from other payment methods? And what risks do they come with? Our consumer credit reporter, Anna Maria Andriotis, has been keeping tabs on this growing industry. We'll ask her about those questions and more after the break.
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No credit card? No problem. Millions of Americans with poor credit or who don't qualify for credit cards at all can still make purchases through buy now, pay later programs. Companies like Affirm, Afterpay and Klarna team up with merchants and allow shoppers to pay for big purchases over time. But it's not that simple. There are plenty of finer points consumers should be aware of before using these services. Let's bring in our consumer credit reporter, Anna Maria Andriotis, to talk about it. Anna Maria, thanks for being with us on the show. Great to be speaking with you. So how do these buy now, pay later programs work?
What are buy now, pay later (BNPL) programs and how do they appear at checkout?
And how are they different from someone using, say, a credit card to buy something and then just paying it back over time?
These programs allow shoppers to split up payments for a purchase that they're making over several weeks or several months. And it's essentially a program that allows for fixed payments. The consumer knows that they are going to, for example, be buying a $100 dress and that over the course of a few weeks or a few months, they'll be making a fixed payment amount that will in the end result in them having paid off that dress by a certain period of time so that the consumer knows that as long as they make that set payment, whenever it's due, they will be done paying for this dress or sweater or whatever item it is that they are buying by a specific end date. There are controls in these programs that allow
for many consumers do bring peace of mind because there is a difference between, okay, I'm going to buy this dress with my credit card and just leave it on my credit card and pay a little bit at a time and incur interest charges. And in the meanwhile, I'm making other purchases on the credit card and I'm For people who aren't paying their credit card bills in full every month, the charges that they put on credit cards can basically be on their cards and be incurring interest on their cards for many months, if not longer.
Now, these programs have been around for a while. And of course, the idea of layaway has been around for ages. But we've seen a number of big retailers offering buy now, pay later as an option more recently.
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