The Hazards of Buy Now, Pay Later

Breaking up payments can make a big purchase seem cheaper, which can tempt you to overspend.

Photo of woman looking at computer and shopping while eating noodles.
(Image credit: Getty Images)

Once upon a time (I am told), it was common practice to walk into a store and put an item on layaway. You’d put down a deposit, make payments over time and collect your item once you paid it off. But now, a new service has turned layaway on its head. With Buy Now, Pay Later (BNPL), you don’t have to wait to bring home something you pay for in installments. Instead, a third party offers you a loan at checkout to cover your purchase, in some cases with no interest or additional fees. More than one-third of U.S. consumers have used such a service at least once, according to research by The Ascent, a subsidiary of The Motley Fool. And BNPL is the fastest-growing e-commerce payment method globally, says Worldpay, a unit of payments processor FIS.

When shopping online, I’ve noticed BNPL offerings for clothes and shoes, but the most popular spending category for BNPL services is consumer electronics, according to a survey by CouponFollow, a consumer savings engine that markets popular coupons. But these point-of-sale loans are on the increase for everything from furniture to travel. For example, VRBO, the online marketplace for vacation rentals, and travel provider Expedia have partnered with Affirm, one of the largest BNPL services.

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Emma Patch
Staff Writer, Kiplinger's Personal Finance

Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.