A new way to shop has been gaining popularity, and may have been used for holiday gifts. More Americans are using Buy Now Pay Later (BNPL) services.
Some people have turned to the plan to avoid accumulating massive credit card debt. These programs allow consumers to make a purchase without paying the full price upfront.
Instead, they can make a down payment and spread the remaining cost over a designated period.
A new report shows on Cyber Monday, consumers spent nearly a billion dollars using Buy Now Pay Later – a record amount for a single day.
Analysts said BNPL spending in the US has gone up in 2024. Last year, consumers spent more than $75 billion, up from $65 billion in 2022.
Utah retailers have offered payment plans through different programs and applications that can be downloaded right on your phone.
Tools like Affirm, After Pay, Uplift and PayPal all allow shoppers to set up accounts to make payments on their purchases.
According to a Bankrate study, there has been consistent use of BNPL across all income levels.
About 40 percent of users have used the pay option, no matter how much money they make.
Not everyone has embraced By Now Pay Later.
“Just the interest rates I think,” Arthur Kelly told KUTV while shopping in Salt Lake. “I guess we just grew up on the principal to stay away from debt. So that’s what we are trying to do.”
Benjamin Cummings, an Associate Professor of Financial Planning at Utah Valley University, cautioned consumers about the risks involved.
“There’s always a temptation to spend now, and then to deal with the consequences later,” Cummings said. “Do I see it growing? Probably. Is it a good idea? I’d be really cautious.”
He said while it might seem like a good deal initially, buyers should be wary of hidden finance charges that could make their purchases more expensive than expected.
“It seems like a good deal now and you’re like ‘Hey, lets get it now,’ cause it’s a good deal. Once you add on these finance charges, it may not be quite the good deal you were thinking it was,” he said.
When asked how BNPL differs from using a credit card, Cummings pointed out that it is similar in nature.
“A credit card is something you can spend anywhere. You’re basically making an agreement with a financial institution to say ‘hey I’m going to charge this place interest to use the money now, and I’ll pay for it later,’” Cummings said.
To avoid potential financial strain, he recommended asking yourself some key questions before opting for BNPL.
“If you cant afford it now, are things going to change in your future where you can afford it later?” he said. “Make sure you have a plan to pay it off as quickly as possible.”
