What to know before using ‘buy now, pay later’ apps

Money Expert Robyn Thompson explains how Buy now, pay later's ease and flexibility can lead to scattered debt and unexpected financial strain.

“Buy now, pay later” apps offer shoppers a way to split purchases into smaller instalments, often with no upfront cost.

But money experts warn the convenience can come with hidden risks if users aren’t careful.

“It actually is one of the fastest growing segments of consumer credit in Canada,” said money expert Robyn Thompson in an interview with CTV Your Morning Wednesday, adding the appeal is simple: quick approval, no hard credit checks and the ability to take home a purchase immediately without paying the full price upfront.

“It essentially gives you the feeling of frictionless spending,” Thompson said. “But just because it feels easy doesn’t mean that it is better or that it is cheaper.”

Here’s what to keep in mind before using buy now, pay later services:

It can be harder to track what you owe

Unlike a traditional credit card, where all charges show up in one monthly statement, buy now, pay later purchases can be scattered across multiple apps and retailers.

“You may be using multiple retailers and having multiple buy now, pay later apps across the board, and sometimes that gets lost in your budget,” Thompson said.

If payments are missed, users may face penalties, interest charges and potential impacts to their credit score.

The sense of control can be misleading

Breaking a purchase into smaller payments can make it feel more affordable, but that perception can lead to overspending.

“It starts to create this space of control, or you start to feel like you have more control over your spending, which is an illusion,” Thompson said.

That illusion, she added, can push people to buy more than they otherwise would, simply because the cost is spread out over time.

These apps are designed to keep you spending

According to Thompson, buy now, pay later services aren’t just payment tools, they’re also sophisticated marketing platforms.

She said retailers often pay fees of three to eight per cent per transaction to offer these services, partly because they encourage larger and more frequent purchases.

“These apps will continue to collect data on your shopping, what you like to buy, and then start to push out deals,” Thompson said.

That can lead to repeat spending, especially if users are regularly prompted with personalized offers, she warned.

When it can make sense to use them

Despite the risks, Thompson said buy now, pay later services can be useful in certain situations, if used carefully.

For example, they may help with planned purchases that are already accounted for in a budget but need to be paid over time.

“If you can break this down into four to six payments that becomes more affordable … there’s no interest that you have to pay,” she said, adding they can also help cover essential, higher-cost items, like a broken appliance, when timing is an issue.

“You’re buying things that will provide value for long periods of time, but putting it in a way where you have affordability with your payments,” Thompson said.

The bottom line

Thompson stresses that buy now, pay later apps should not be seen as a way to spend more.

“They’re not spending strategies, they’re payment strategies,” she said, adding the key question isn’t whether you can split the cost. It’s whether you can truly afford the purchase in the first place.