‘Buy Now, Pay Late’ Options Boom During Pandemic, But Does It Make Financial Sense? 

SALT LAKE CITY, Utah — “Buy now, pay later” options exploded during the pandemic, making it a lot easier to buy online using installments. The financing option has become so popular that analysts estimate installment spending will balloon to $760 billion annually by 2025. But does it make financial sense? 

“Buy now, pay later” options allow customers to break up purchases into installment payments.

It is no longer just for designer clothes, pricey electronics or high-end exercise bikes. It has become an option for purchasing healthcare, travel — even for paying rent.

“They really kind of hit critical mass,” said Matt Schulz, LendingTree’s chief industry analyst. 

LendingTree recently released a study that found 31% of shoppers have used “buy now, pay later.” 

“People like to use these loans,” said Schulz. “I also think people really like these types of loans as opposed to credit cards because they’re finite, because you know exactly how long it’s going to take to pay them off.” 

Many “buy now, pay later” services tout zero-interest payments if you pay for your purchase on time, but that has tripped up a lot of buyers.

LendingTree’s study found more than 7 in 10 people got dinged with fees or deferred interest, possibly at a rate you might face if you missed a credit card payment.  

Some “buy now, pay later” services charge late fees but no interest, while others charge interest but no late fees, and there are a few services that charge both.

Nearly a third of users surveyed by LendingTree said they had no idea about the rates or fees they could be subjected to before they signed up for the service. 

“It can hurt your credit if you are late with a payment or if you’re not following the payment schedule,” said Schulz. 

There is another catch: two out of three shoppers told LendingTree that using “buy now, pay later” caused them to overspend, buying things they would not normally be able to afford. 

“That’s never a good thing, especially in a difficult economy,” said Schulz. 

Still, consumers clearly have enjoyed the option to “buy now, pay later.” 

“We saw about two-thirds of people who had used these services said that they had used them five times or more,” Schulz explained. “That’s an awful lot of people using these services.” 

One thing to consider: if you pay off your purchase on time, the 0% interest can make this a better option than a store credit card. Just make sure you read the fine print. Make sure you know the payment schedule as well as interest or fee penalties. 

“If you make a mistake, it can hurt you,” warned Schulz.