In the booming market of buy now pay later financing, those opting in generally get to spread payments over a number of weeks at no cost, because it’s the merchants that pay for the service in the hopes it will convince consumers to spend more.
That’s certainly the promise providers like Affirm and Klarna advertise to businesses, touting 20% boosts to order totals, while Shopify says its installment program can lead to up to a 50% boost in average order value, plus up to 28% fewer abandoned carts.
Buy now, pay later could lead to overspending
While the option can add convenience at possibly no direct cost to consumers, financial experts warn it’s far from risk-free.
“The temptation is very great to overspend,” said insolvency trustee Doug Hoyes.
With the option popping up during online checkout, or being offered by a cashier, consumers are also not necessarily fully thinking through the decision, and the implications of what they’re agreeing to, said Hoyes.
“For the vast majority of people, you are taking on debt without really realizing it. You’re not making a conscious decision that yes, I will borrow that money. And that’s dangerous, obviously.”
www.moneysense.ca
