DENVER — According to a report published by Adobe Analytics Monday, "buy now, pay later" online purchases surged during the week of Black Friday. Despite its soaring usage, experts urge consumers to be cautious when using this type of financing.
"Buy now, pay later" is marketed as a way for consumers to pay for goods in a series of payments rather than handing over the full amount at checkout. Klarna, Afterpay and Affirm are just some of the "buy now, pay later" companies businesses are turning to.
Most stores or businesses who allow "buy now, pay later" require users to download the "buy now, pay later" company's app, link their bank, credit or debit card, and then pay for their purchase in weekly or monthly installments.
Mauricio Sanchez, a Denver resident, said he previously made purchases using "buy now, pay later" methods, but quickly became overwhelmed.
"You get into two, three different loans at the same time, and it becomes very hard to get out," he said. "Now I stick to cash only."
Another shopper told Denver7, "For many of us who live paycheck to paycheck, this offers a way for us to still be able to pay bills on time, purchase medically necessary items and medications, as well as products and services we could not have otherwise afforded within various pay cycles."
Kishore Kulkarni, an economics professor at Metropolitan State University Denver, said if someone has assured revenue streams or sources of income, then "buy now, pay later" financing can be useful. However, if a person has any doubts, he urges shoppers to be "cautious".
"Some of them probably will have to default because they just don't have money, and then they will lose the car, they will lose the furniture, they will lose whatever they are buying," Kulkarni said.
If someone defaults on a "buy now, pay later" plan, they could face penalties, late fees or portion of the total amount owed.
"Number one, if you really don't have money, you should not be using this avenue," Kulkarni said.