“Buy now, pay later”: risk, benefits of the popular new payment system offered by Target, Walmart, Amazon, more
Target announced Wednesday that it joins other major retailers such as Amazon and Walmart by offering “buy now, pay later”, giving online shoppers the ability to order and receive products on the same day while spreading payments over weeks or months.
Unlike vacation, “buy now, pay later” allows customers to take home their purchases before paying, said Hitha Herzog, research director at H Squared Research.
Experts predict that more and more companies will soon be partnering with third party service providers such as Afterpay, Affirm, and Sezzle to take advantage of this option.
And no wonder: in a recent 2005 online consumer survey60% said they used the “buy now, pay later” option. This option is especially attractive to younger shoppers and people who don’t have credit cards, experts say.
“According to 38% of Buy Now, Pay Later users, they will eventually replace their credit cards, and more than half (56%) say they prefer Buy Now, Pay Later compared to using credit cards to make purchases.” researchers observed.
Installment plans are also popular with retailers because they encourage customers to spend more money.
“Consumers are really worried about being able to deliver their products in time for Christmas. So when you see “buy now, pay later”, you can get your product now. I don’t have to worry about buying fever, ”Herzog said.
However, experts warn that this option also comes with risks.
“Payments are interest-free if you pay on time,” Herzog said. “If you miss or don’t pay, they’ll charge you a late payment.”
Buy now, pay later loans are like any other form of debt, so buyers should be careful and prudent to avoid feeling guilty or the buyer’s financial hassle.
And those purchases lose reward points and the cashback that credit cards offer.
Experts say first-time buyers looking to buy now pay later should start small and consider budgeting to avoid losing payments. Read the terms and conditions of these programs and understand the consequences of failing to meet payment deadlines.
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