SALT LAKE CITY (KUTV) — A new way to shop is gaining popularity and may have been used for holiday gifts. More Americans are using Buy Now Pay Later (BNPL) services.
Some people have turned to this plan to avoid accumulating large credit card debts. These programs allow consumers to make purchases without paying the full amount upfront.
Instead, you can make a down payment and spread the remaining costs over a specified period of time.
Consumers spent nearly $1 billion using Buy Now and Pay Later on Cyber Monday, a record amount for a single day, according to a new report.
Analysts said US BNPL spending will increase in 2024. Last year, consumers spent more than $75 billion, up from $65 billion in 2022.
Utah retailers offer payment plans through a variety of programs and applications that can be downloaded directly to your phone.
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Tools like Affirm, After Pay, Uplift, and PayPal all allow shoppers to set up accounts to pay at the time of purchase.
Bankrate research shows consistent use of BNPL across all income levels.
Approximately 40% of users have used a paid option, regardless of their income.
Not everyone is adopting Pay Later right now.
“I think it's just the interest rate,” Arthur Kelly told KUTV while shopping in Salt Lake. “I think we grew on principal to not take on debt, and that’s what we’re trying to do.”
Benjamin Cummings, associate professor of financial planning at Utah Valley University, warned consumers about the risks involved.
“There's always the temptation to spend now and deal with the consequences later,” Cummings says. “See it growing? Maybe. Is that a good idea? I'd be really careful.”
He said while it may seem like a good deal at first, buyers should be wary of hidden finance charges that could make the purchase more expensive than expected.
“Now it seems like a good deal and you're like, 'Okay, let's get it now,' because it's a good deal. Add in these financial fees and it might not be as good a deal as you thought. ” he said.
Asked how BNPL differs from using a credit card, Cummings pointed out that they are essentially similar.
“Credit cards can be used anywhere. They're basically like you have a contract with your financial institution that says, 'If you spend this money now, I'll charge you interest and I'll pay you later.'” Cummings says.
To avoid potential financial burden, we recommended asking yourself some important questions before choosing BNPL.
“Even if you can't afford it now, will things change in the future and you'll be able to afford it later?” he said. “Make a plan to pay it back as soon as possible.”
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