Is it possible to buy products and pay them off over time efficiently, or is this a scheme for corporations to benefit from? 

Customers now see options to pay in four installments: zero interest, zero problems. The buy-now, pay-later options from companies like “Klarna” and “Afterpay” offer consumers a different way of making payments.  

You can use credit cards, which allows consumers to make smaller payments over time rather than paying full upfront, which might be viewed as a more responsible option for purchasing goods. 

Considering the current state of inflation, student debt, and volatility in employment for the majority of individuals under the age of 35, these payment methods are likely perceived as great news. However, are these types of payment programs really helping consumers to purchase products more responsibly? Or, instead, is it simply delaying the inevitable consequences of poor financial decisions? 

According to a survey by LendingTree, the number of usages of Buy Now Pay Later (BNPL) products has increased by 41% in 2020; however, only 34% of BNPL users reported not having made at least one late payment within the last calendar year, and 33% of BNPL users have three or more active BNPL agreements concurrently. The most concerning statistic showing that “62% of users believe that making timely payments on their BNPL loans will improve their credit scores.” It doesn’t seem like it does. 

My worries are based on how to avoid misunderstandings. After speaking with students at the University of Florida, I’ve learned that most of them feel these apps give them some benefit by allowing them to purchase items over time in smaller parts instead of paying the total upfront. 

Cahron Rackley, graduate student in sports management said, “I buy clothes and concert tickets on Klarna because it breaks the payment into easy to manage pieces.” A second student indicated that it allows her to purchase an item right away so that she won’t miss the opportunity in case it sells out.  

On the other hand, there were also claims from students in acknowledging how easy it can be for them to repeatedly use BNPL apps and accumulate a lot of debt without realizing it.  

Americans who earn high annual incomes typically take on multiple BNPL loans at roughly the same time period. It may seem counterintuitive but this has led me to believe additional evidence supports that use of these platforms benefits wealthier users than those with low to mid annual incomes. 

Those who can afford to make multiple payments typically have a consistent income coming in to maintain these payments. Since your account will have that balance, you are just opting to continue holding that same amount for a longer time. Additionally, many users of BNPL products think they are building credit by utilizing a BNPL platform; however, this statement is generally false at this time.