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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Swoop Airlines. (Contributed)
COVID-19 case reported on Abbotsford-bound flight last week

Affected flight landed in Abbotsford on Nov. 16

The Abbotsford Pilots and all other junior teams in B.C. have been paused from competition after new restrictions put in place to battle the spread of COVID-19.
Abbotsford Pilots, PJHL grounded after new restrictions

Games won’t played until after Dec. 7 at the earliest, minor hockey limited to local competition

Last year’s Realtors Care Blanket Drive collected 192 bags of warm clothing and blankets for the Abbotsford-Mission area. The 2020 version is collecting only cash donations. (File photo)
Annual Realtors Care Blanket Drive adapts to pandemic

Campaign across the Fraser Valley asks only for cash donations in 2020

Abbotsford’s Chase Claypool celebrates with teammates after scoring a touchdown on Sunday. (Karl Roser/Pittsburgh Steelers)
Abbotsford’s Chase Claypool scores 10th touchdown

First wide receiver since 1960 to record 10 touchdowns in 10 games, Steelers still unbeaten

Former BC Lion Angus Reid was the keynote speaker at the 10th annual National Philanthropy Day lunch in Abbotsford on Nov. 16.
Three awards presented at National Philanthropy Day lunch

Event in Abbotsford honours those who have made a difference

People wearing face masks to help curb the spread of COVID-19 cross a street in downtown Vancouver, on Sunday, November 22, 2020. The use of masks is mandatory in indoor public and retail spaces in the province. THE CANADIAN PRESS/Darryl Dyck
B.C. reports 17 COVID deaths, 1,933 new cases as hospitalizations surge over the weekend

There are 277 people in hospital, of whom 59 are in ICU or critical care

An aerial shot of Cedar Valley Lodge this past August, LNG Canada’s newest accommodation for workers at the project site in Kitimat. This is where several employees are isolating after a COVID-19 outbreak was declared last Thursday (Nov. 19). (Photo courtesy of LNG Canada)
Forty-one positive COVID-19 cases associated with the LNG Canada site outbreak in Kitimat

Thirty-four of the 41 cases remain active, according to Northern Health

Workers arrive at the Lynn Valley Care Centre seniors home, in North Vancouver, B.C., on Saturday, March 14, 2020. It was the site of Canada’s first COVID-19 outbreak in a long-term care facility. THE CANADIAN PRESS/Darryl Dyck
Rapid tests ‘not a panacea’ for care homes, Dr. Bonnie Henry says

B.C. lacks capacity for daily tests of thousands of workers

(Delta Police Department photo)
Cannabis edibles found in Halloween bag lead B.C. police to illegal lab

Delta police arrested a man and a woman while executing a warrant at a residential property Nov. 20

Join Black Press Media and Do Some Good
Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

A woman being arrested at a Kelowna Value Village after refusing to wear a mask on Nov. 22.(@Jules50278750/Twitter)
VIDEO: Woman arrested for refusing to wear mask at Kelowna Value Village

RCMP claims the woman was uncooperative with officers, striking them a number of times and screaming

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

B.C. Liberal MLA Shirley Bond questions NDP government ministers in the B.C. legislature, Feb. 19, 2020. (Hansard TV)
Cabinet veteran Shirley Bond chosen interim leader of B.C. Liberals

28-member opposition prepares for December legislature session

Motorists wait to enter a Fraser Health COVID-19 testing facility, in Surrey, B.C., on Monday, November 9, 2020. THE CANADIAN PRESS/Darryl Dyck
COVID-19: What do rising positivity rates mean for B.C.? It’s not entirely clear

Coronavirus cases are on the rise but the province has not unveiled clear thresholds for further measures

Most Read