Buy now, pay later options surge during pandemic

What you need to know about the process
Buy now pay later options
Posted at 2:52 PM, Jan 31, 2021
and last updated 2021-02-01 13:50:37-05

TUCSON, Ariz. (KGUN) — Spending habits for some Americans are changing because of the pandemic as shoppers look for new ways to get what they need before paying it off. KGUN9 On Your Side took a deeper look at those trends.

The coronavirus pandemic has forced millions of Americans out of work leaving them strapped for cash.

University of Arizona retail and consumer professor Dr. Sabrina Helm says families are looking for ways to manage their budget.

Now, retailers are changing their game plan. They're making shopping easier for customers who need more time to pay things off.

“If they have the money, they might be able to splurge, we see a little bit of that happening, but on the other end of the spectrum there are a lot of families who are having great financial difficulties,” Helm said.

Buy now pay later options like Afterpay, Affirm, Klarna and Paypal are becoming more popular. According to Bank of America installment plans can range from 4 to 10 weeks.

“Now there are alternative payments methods as well. The current models that are so En Vogue they enable the consumer to take home that product right away for instant gratification or because they really need this product,” Helm said.

Helm says you should also be fully aware of the rules and fees before you make the buy. Millenials, Gen-Z and Gen-X buyers are the most common users of the service, as the payment option continues to grow in popularity.

A recent survey from affirm shows that 54% of consumers are interested in using pay overtime services in 2021. Installments are typically linked to your debit card. However, some payment options can affect your credit score and others not so much. You should also know the process of making a return and getting a refund if needed.

"Once consumers get used to these particular payment methods that are more convenient, they may tend to use it no matter what. Younger consumers are quite hesitant to use credit cards because of the economic crisis they saw in 2008 what credit can do to their families. You need to deal with the retailer and you need to deal with financing your purchase. As a consumer you need to deal with two different merchants that you need to coordinate and watch over,” Helm said.

The bottom line is to do some research before making the commitment to use the service, and that includes small businesses that might be part of the mix, because a change in fees can have a big impact on the cash flow coming in.

"If they gain new customers through this new means of payment that’s a win. If the current customer base switches to this new form of payment then it can be problematic because they are faced with much higher fees,” Helm said