Fueled by several hot Silicon Valley startups as well as a push by the big credit card companies, “buy now, pay later” is now available for purchasing a $1,500 Peloton exercise bicycle as well as a $60 floral bouquet. Thousands of retailers, big and small, often have an option on their websites to pay for a purchase in installments at checkout. In the case of credit cards, customers are being allowed to create fixed payment plans days or even a few weeks after the purchase.
Americans seem to be champing at the bit to try this financial option, which has been common outside the U.S. for some time. One major credit card company says roughly six out of every 10 of its U.S. customers started a buy now, pay later program for the first time this year, and the Silicon Valley-backed companies who offer these plans are seeing tens of thousands of new customers every week.
“My shopping habits can be a bit impulsive, so I like the ability to break it up over several payments,” said Shahin Rafikian, 26, who lives in Los Angeles and has used several buy now, pay later services to purchase concert tickets, vinyl records and other items.
Rafiki and said he would have likely purchased fewer large-ticket items if the cost had just gone onto a credit card that never got paid off.
Industry advocates say buy now, pay later programs are preferable to credit cards because there are fixed monthly payments and any interest is clearly stated upfront. Consumer advocates, typically skeptical about any new financial product, also have been relatively more positive about buy now, pay later since any plan would have a beginning and end date. Most of their worries concern any fees that might be associated with late payments.
“These products do encourage people to pay purchases off quicker and usually with less interest, but if people are using them to simply buy more than they should and getting over their heads, paying late fees, etc., are they really helping manage people’s expenses?” Lauren Saunders, associate director for the National Consumer Law Center, said.
Adobe Digital Economy Index, which analyzes direct consumer transactions online. said revenue on Cyber Monday from buy now, pay later plans rose 21% from a year ago.
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