The concept of Buy Now, Pay Later has been around since the Great Depression. Layaway shopping, which mostly disappeared during the 1980s, involved making a small deposit and instalment payments before taking your purchase home.
Now shoppers have another option: Buy Now, Pay Later services. The biggest difference from layaway is you don’t have to wait to take your item(s) home, which may be why these services are becoming more popular.
There are a few reasons why Buy Now, Pay Later services are growing in popularity. “The big draw of Buy Now, Pay Later services is that you may get an interest-free payment plan, and you don’t need good credit for approval,” says Nathan Hamilton, credit card expert and industry analyst at The Ascent. “They’re also very convenient—you can set up everything in a few minutes during the checkout process,” he says.
Although Buy Now, Pay Later may offer some perks, there are also some drawbacks. The biggest one may be spending more than you intended.
“Try not to make a habit of using these services. They’re helpful if you really need to finance a purchase, but whenever possible, it’s best to avoid taking on debt for everyday purchases,” Hamilton recommends.
Another downside: the potential for fees and interest. Depending on the Buy Now, Pay Later company, and your creditworthiness, you may pay fees, interest, or both for the convenience of financing.
Although some companies may offer 0% APR for a specific timeframe, you may pay a lot more once the promotional period ends. “Buy Now, Pay Later works well when you stick to the payment schedule, but if you don’t, you could get charged fees and interest,” Hamilton warns.
To avoid trouble, Hamilton recommends reviewing the payment schedule—including the exact payments, when they are due, and how long you have to pay off your purchase.