'Buy now, pay later' trend has analysts concerned shoppers could pile on debt

TORONTO — ‘Buy now, pay later’ is a popular trend right now, especially for younger online shoppers, and more companies are offering it as a way to make payments.

Years ago it was called a layaway plan. You made a deposit on an item with a retailer and, once it was paid for, you picked it up.

Buy now, pay later is the opposite of that and some fear it could make it too easy for some shoppers to spend more than they should.

Apple is the latest company to partner with a buy now, pay later program. Through the website PayBright, you can purchase Apple products in installments of over 12 to 24 months.

On its website, PayBright says you can shop now and pay overtime at your favourite stores. You can also pay at your own pace through Affirm and get it while it's hot through Afterpay.

Buy now, pay later programs are after a piece of the profits from credit card companies. Some allow you to make payments on items that cost as little as $20 to as much as $17,000.

They charge retailers a fee on every transaction, but there can be added costs for consumers too.

“The concern is it will be too easy for people to get in over their head,” Anne Arbour with the Credit Counselling Society told CTV News Toronto Friday.

During the pandemic, many people have turned to online shopping and not only do consumers want items shipped right away, but many also want them before they have the ability to pay for them.

“It’s easy to click and buy things that they can't necessarily afford right now and they don't have the money saved up ahead of time. They feel they can figure it out as they go," Arbour said.

The buy now, pay later programs have different rules and payment structures so it's important for consumers to know exactly how much they're spending.

Some hazards of these programs are a temptation to overspend, possible late fees, interest charges and falling into a cycle of borrowing.

Consumer advocates are also concerned about paycheck advance apps that allow you to request a portion of your paycheck before payday, usually for a fee or subscription cost.

It sounds easy enough, but there are potential downsides.

“These services can be great to help you out of a jam every once and a while, but you have to really be careful not to make it a regular habit. If you end up using these services regularly, the fees can add up,” Octavio Blanco with Consumer Reports told CTV News Toronto.

Consumers are advised to use buy now, pay later and paycheque advance programs sparingly to be sure they don't take on more debt than they should.