Buy now, pay later: Interest-free payment plans gain popularity but carry risks
More shoppers are turning to "buy now, pay later" (BNPL) services that promise interest-free installment payments at checkout, both online and in stores.
BNPL services offer an alternative to high-interest credit cards but are raising concerns about overspending and hidden financial pitfalls.
How it works
Instead of paying the full price upfront, consumers using BNPL services like Klarna, Affirm and Afterpay can split their purchases into multiple payments, often four, without interest.
Sydney Klein, who used Klarna to buy a pizza oven, said, "I was ok I'm gonna get this, but I can't pay five to six hundred dollars right now, so at the bottom was 4 interest-free payments to be made every two weeks."
She added, "I hooked it up to my debit card; it was super easy and every two weeks they took out the payment."
The pros and cons
April Lewis-Parks, director of education at Consolidated Credit, says BNPL is about managing cash flow.
"It really is cash flow," she said, noting the plans can help consumers afford everyday items. But she also cautions that some users end up in debt, and her organization is working on a pamphlet to educate the public on BNPL best practices.
While BNPL usually doesn't impact credit scores, late payments can trigger penalties and overdraft fees, prompting critics to warn about the risks of impulsive spending.
