‘Buy now, pay later’ services are getting popular. Can you manage the risk?
Global News
Typically, 'buy now, pay later' loans were used for big purchases like TVs or laptops. But research suggests Canadians are dipping into these services for small purchases.
Canadians are feeling the pinch from the climbing cost of living, with growing numbers of people turning to ‘buy now, pay later’ approaches to their spending.
Experts warn that while it can help ease the up-front pressure, it can be a risky tactic in the long run.
“I have noticed that it’s on every single retail website, and if one is not disciplined, I can see how it’s so easy for people to agree to buy now, pay later because the payments look so low,” said Stacy Yanchuk Oleksy, CEO of the Edmonton-based non-profit credit counselling agency Money Matters.
“If one is struggling financially and they’re told that if they paid $5 or $10 a month, it’s a really easy hook for people to make that purchase. However, my concern with those buy now, pay later apps is that people lose track of what they’ve committed to.”
‘Buy now, pay later’ offers are not new — effectively, it is a loan or a credit line normally used for a large purchase.
“Our mortgages are the original ‘buy now, pay later,’ and it seems like companies have found a way to capitalize on that concept,” said Kelly Ho, a Vancouver-based certified financial planner.
‘Buy now, play later’ offers have increased rapidly during the years since the pandemic.
According to research from Morgan Stanley, ‘buy now, pay later’ loans financed two per cent of all e-commerce sales in 2020.
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