“This practice - essentially using a credit card to pay off other debt - is a sign of inability to repay,” according to the Center for Responsible Lending and other groups in a March 2022 joint report.īuy now, pay later services have access to shoppers’ purchasing data, which can then be used in future marketing campaigns - likely encouraging even more spending. Repaying buy now, pay later purchases with credit cards isn’t any better, even though some do it. Overdrafts typically trigger their own fee. One in three buy now, pay later users reported overdrafting in January 2022, according to a survey from Morning Consult, a market research organization. Some buy now, pay later loans require autopay, which can be problematic for people who have insufficient funds in their connected payment accounts, as they could incur a late fee from the buy now, pay later company, as well as an overdraft fee from their bank.Īccording to the CFPB, 89 % of 2021’s buy now, pay later repayments were made on a debit card, which opens up the possibility for overdrafting on accounts with insufficient funds. According to the CFPB, 10.5% of buy now, pay later borrowers were charged at least one late fee in 2021. Many buy now, pay later services charge late fees, typically around $8. And since it can encourage shoppers to take on more debt than they can afford, buy now, pay later may sometimes do more harm than good, many experts say. THE PROBLEMS WITH USING BUY NOW, PAY LATERīuy now, pay later can entail confusing terms, challenges in filing and resolving disputes, and strict requirements, like required use of autopay. In fact, the CFPB warns it’s a troubling trend. It grew to $60 million in 2020 and $800 million by 2021, logging an astounding 1,233% increase in one year and a 7,900% increase in two.īut that growth isn’t necessarily good. In 2019, just $10 million was spent on travel-related buy now, pay later services. While buy now, pay later has been popular for years in segments such as apparel and beauty, it’s slowly growing in other areas, including insurance, education and groceries - and travel is outpacing them all. The shopper immediately gets their purchase and pays it back later, typically in four installments or monthly payments. Book a flight or hotel room now, and pay it off later? It’s an increasingly common trend in travel spending.Ĭompanies like American Airlines, United Airlines and vacation rental website Vacasa now offer the option to make reservations now and pay it back incrementally over time with “buy now, pay later” services.īetween 20, travel and entertainment purchases were the fastest-growing segment of the buy now, pay later phenomenon, according to a September 2022 report from the Consumer Financial Protection Bureau.īuy now, pay later is an alternative type of short-term credit for online purchases offered by companies including Affirm, Afterpay and Klarna.
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