A Sezzle logo is shown in a person’s online shopping cart on a laptop in Vernon, B.C. on Wednesday, November 18, 2020. Canadians shopping for Sephora makeup, Herschel Supply Co. backpacks and Lush beauty products might have recently noticed a new option during the checkout process: buy now, pay later. The offers come from fintechs like PayBright, Afterpay, Sezzle, Klarna, QuadPay and Affirm. THE CANADIAN PRESS/Jesse Johnston

A Sezzle logo is shown in a person’s online shopping cart on a laptop in Vernon, B.C. on Wednesday, November 18, 2020. Canadians shopping for Sephora makeup, Herschel Supply Co. backpacks and Lush beauty products might have recently noticed a new option during the checkout process: buy now, pay later. The offers come from fintechs like PayBright, Afterpay, Sezzle, Klarna, QuadPay and Affirm. THE CANADIAN PRESS/Jesse Johnston

Be careful with buy now, pay later deals for nominal purchases: experts

These new services focus on nominal purchases and allow consumers to pay in instalments, sometimes interest free

Online shoppers may have recently noticed new options on the checkout pages of their favourite retailers: buy now, pay later.

In addition to standard payment methods like credit cards and PayPal, companies such as Sephora makeup, Herschel Supply Co. backpacks and Lush beauty products offer new options from fintechs like PayBright, Afterpay, Sezzle, Klarna, QuadPay and Affirm.

These new services focus on nominal purchases and allow consumers to pay in instalments, sometimes interest-free — which can be enticing for Canadians who are low on cash during the COVID-19 pandemic.

However the options are not without their pitfalls.

After a qualifying process, the services allow shoppers to pay for their purchases in small increments spread out over weeks or months and sometimes offer access to a tracking portal where they can adjust their payments if unforeseen circumstances come up.

Some, like Afterpay, make most of their revenue from retailers and don’t charge fees or interest to shoppers, but experts advise against them because they often encourage consumers to spend beyond their means.

“The thing that can really get you in trouble is thinking of it as ‘oh $20 here, $60 there is not a big deal,’ but those little purchases can add up really quick,” said Julia Faletski, a Vancouver-based financial adviser at CI Direct Investing.

“You just don’t want to get yourself in this situation where that leather jacket is the thing that sinks your finances.”

However, despite the danger of getting too deep in debt, the services do have their upsides, she said.

For example, if you agree to zero per cent interest rates or rates that are lower than your credit card and can pay something off speedily, then the services can work for you.

Laura Nadler, the chief financial officer of AfterPay U.S., said her company’s service is ideal for consumers who want to stagger payments to line up with a budget or match when a bi-weekly paycheck comes in.

AfterPay’s offering, she said, is also good for people who don’t want to take out a traditional loan or pay upfront fees or interest.

When deciding whether to use a pay now, buy later service for a nominal purchase, think about it in steps, said Chantel Chapman, the Vancouver-based founder of the W-T-Finances blog and a former financial literacy consultant.

The first step is to ask yourself why there is so much urgency to purchase something. A lot of people spend to avoid emotions like boredom, pain or feelings of inadequacy, which can be handled in more healthy and alternative ways, she said.

The second step is to think about why you’re considering a plan.

“You may feel a sense of shame for spending that much money on yourself and it feels less painful to spread it out over four months, so that’s something to look out for,’” said Chapman.

The last step is to think about what you’re getting yourself into.

Buy now, pay later plans can be difficult to understand and carry a mental cost because you’re suddenly adding an extra and recurring payment to your monthly budgeting, she said.

The plans can become a bad deal if you’ve overextended yourself by too much, have no prospect of being able to afford whatever you’re buying or haven’t looked closely at the terms.

“Make sure that you have a really clear idea of what you owe and…make sure that you abide by the payment schedule because if you fall behind, this is where the penalties really become significant,” said Faletski.

AfterPay’s Nadler said more than 90 per cent of its customers pay on time and those who don’t are prevented from purchasing more items.

However, Faletski warned that users of buy now, pay later services who aren’t careful can rapidly see their credit score take a hit and end up with even more debt to pay off.

If you end up in that situation, Chapman said it’s often time to turn to credit counselling or professionals to help put together a plan for recovery.

The bottom line, she said, is that you should think long and hard when mulling buy now, pay later plans and don’t ignore the red flags.

“If you’re in a situation where you only have this small amount of money…or if you don’t even have any money to pay for this stuff…you should not.be using these payment plans.”

Tara Deschamps, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Just Posted

Justin Bond’s Bahrain 1 took a team around a year to construct. It gets its name because the Sheik of Bahrain is a major sponsor of the team. / Photo courtesy of Justin Bond.
Mission dragracer wins Atlanta race, ousts back-to-back world champion

Justin Bond goes quarter-mile in 5.738-seconds, beating champ Stevie ‘Fast’ Jackson on home turf

Former UFV Cascades wrestling coach Arjan Singh Bhullar is now the ONE heavyweight champion after defeating Brandon Vera via TKO in round two on Saturday in Singapore. (ONE Championship)
Former UFV wrestling coach wins MMA championship

Arjan Singh Bhullar captures ONE heavyweight title, first Indian origin fighter to achieve honour

Jamie and Erin O’Neill, who are renting a 107-year-old house at 45837 Knight Rd., are wanting to save it from the wrecking ball and move it when it comes time for the owners of the house to build a new house on the property. They are pictured here outside the home on Tuesday, May 11, 2021. (Jenna Hauck/ Chilliwack Progress)
Chilliwack couple wants to save 107-year-old home from demolition, asking for community support

O’Neills have less than year to find new property, raise funds to move Knight Road house

Archway Community Services is among local agencies receiving one-time grants through the Civil Forfeiture Crime Prevention and Remediation grant program. (Photo courtesy of Archway)
Nine Abbotsford projects receive $345K in civil forfeiture grants

Funds awarded to projects aimed at prevention of crime and domestic violence

Karl Eha showing off a fishing rod that was originally made in 1972. Patrick Penner photo.
Mission’s Eha Sports offering store credit for old fishing gear, plans to donate to poor Latin American children

Karl Eha recalls time as hungry kid in post-war Germany, says fishing kept him full

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

The Independent Investigations Office of BC (IIO) (File Photo)
Police watchdog investigating after man found dead in Surrey following a wellness check

IIO says officers ‘reportedly spoke to a man at the home before departing’

On Friday, May 14 at Meadow Gardens Golf Club in Pitt Meadows, Michael Caan joined a very elite club of golfers who have shot under 60 (Instagram)
Crowds at English Bay were blasted with a large beam of light from an RCMP Air-1 helicopter on Friday, May 14. THE CANADIAN PRESS/Marc Grandmaison
Police enlist RCMP helicopter to disperse thousands crowded on Vancouver beach

On Friday night, police were witness to ‘several thousand people staying well into the evening’

People shop in Chinatown in Vancouver on Friday, February 5, 2021. THE CANADIAN PRESS/Jonathan Hayward
Vancouver community leaders call for action following 717% rise in anti-Asian hate crimes

‘The alarming rise of anti-Asian hate in Canada and south of the border shows Asians have not been fully accepted in North America,’ says Carol Lee

Sinikka Gay Elliott was reported missing on Salt Spring Island on Wednesday, May 12. (Courtesty Salt Spring RCMP)
Body of UBC professor found on Salt Spring Island, no foul play suspected

Sinikka Elliott taught sociology at the university

The first Black judge named to the BC Supreme Court, Selwyn Romilly, was handcuffed at 9:15 a.m. May 14 while walking along the seawall. (YouTube/Screen grab)
Police apologize after wrongly arresting B.C.’s first Black Supreme Court Justice

At 81 years old, the retired judge was handcuffed in public while out for a walk Friday morning

Surrey RCMP in the 4900-block of 148th Street, a short road just off of King George Boulevard, on May 15, 2021 after a male was allegedly assaulted with a “pipe-like” weapon that morning. (Photo: Shane MacKichan)
Surrey RCMP investigating after person reportedly injured with ‘pipe-like’ weapon

Police investigating incident in the 4900-block of 148th Street

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Most Read