SAN FRANCISCO (KCBS RADIO) – It seems like buy now, pay later programs are everywhere lately, popping up as options for everything from groceries to vacations. Sure, they might make it easy in the moment to make purchases, but are they really a sound financial decision?
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Christopher Uriarte, payments expert at the consulting firm Glenbrook Partners, joined Audacy this week to dig into that question.
“It’s definitely getting a lot more attraction, most certainly, but you know, we just want to stress that folks have been using credit cards to pay for everyday expenses like groceries for many, many, many years now,” he told KCBS Radio’s Maggie Shafer. “But BNPL is obviously the newer model that a lot of folks are familiar with and more and more folks are turning to BNP for food purchases, grocery purchases, everyday necessities, more and frequently these days. So, it is most definitely a rising trend.”
According to a recent survey from Lending Tree, half of the 2,000 U.S. participants said they had used a BNPL loan and 11% said they had used them at least six times. Common BNPL services include Affirm and Klarna. Uriarte also said that the programs seem to appeal to consumers across a range of demographics.
While consumers might be attracted to the programs because they promise no interest, they should be careful to read the fine print. That’s especially important as Lending Tree noted an increasing amount of BNPL users are paying late. As of last month, 42% of BNPL users said they paid late over the past year, compared to 34% who said the same last year.
“There certainly could be fees associated with non-payment,” Uriarte said. There could be additional type of interest tacked on, either higher interest rates or additional fees that are tacked for some of these payments that are made. It really depends on the specific type of BNPL payment.”
He added that some BNPL providers have even had to modify their fee programs in extreme cases. Many of them actually rely on fees as part of their business model.
“The industry has gotten a lot better these days about assessing these and are a little bit more fair to consumers, but nonetheless, consumers need to ensure that they understand what the payback terms are here and what some of the consequences could be if they don’t pay back these BNPL providers in time,” Uriarte said.
In particular, he warned against ending up in too many BNPL programs at one time. Having four, five or even six open at once can become difficult to manage, but nearly one in four BNPL users surveyed by Lending Tree said they had three or more active BNPL loans at one time.
“That causes a lot of financial trouble and a lot of financial hardship particularly for those who are using these as mechanisms for cash management because they’re cash strapped,” Uriarte explained.
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