Popularity of 'Buy Now, Pay Later' apps prompt warnings from financial experts

ORLANDO, Fla - A number of Americans are turning to Buy Now, Pay Later services that let you get what you need, and pay for it in split payments, as opposed to all at once. This trend is giving consumers the flexibility to pay by installments and is really changing the way people shop during this holiday season, but experts are warning of hefty fees and penalties.  

For Disya Stephens, every penny matters. With inflation on the rise, the Altamonte Springs resident tries to take advantage of every opportunity she has to save.  "I love it. I love using it," Stephens said. She has turned to split payment options for some of her larger purchases.

"They’re becoming very popular. It seems like every time I go to buy something online, I see a pop-up for Affirm or something like that," Justin Bickerstaff of Integrated Wealth Solutions said. 

It’s called Buy Now, Pay Later, or BNPL. It’s a short-term financing option that lets you split your purchase into multiple equal payments until your purchase is paid in full. Services like Klarna, Afterpay and Affirm are offered as payment options at plenty of stores, including Walmart, Macy’s, Target, Best Buy and many more. 

For a lot of people, it sounds simple enough. You get what you need now, pay it off over a few months and accrue no interest, as long as you pay on time. Experts are warning if you aren’t careful, those late fees and penalties could pile up and ruin your financial future.

"The general premise of some of these platforms is that they really don’t report anything to your credit bureau but if you’re late, then they could report it as a delinquency on your credit bureau which could impact you down the line for getting auto loans or mortgages or something even more important potentially," Bickerstaff explained.

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"Before, I was referring to all my friends and family. Look, if you really need something, go ahead and use this as a temporary thing. You know, it’s wonderful. But now, I could not recommend this to anybody," Tammy Elmer said. The Sanford resident said her opinion of BNPL apps changed after a fraudulent charge for a $600 television, popped up on her account. 

"These fraudulent charges have accrued on my account. Even with the fraudulent charge, I believe my last statement was almost $2,000,"  Elmer said.

Elmer said what she thought was a practical financial option, turned out to be a nightmare for her family. A year later and she is still trying to get this situation resolved. "They’re still saying that I was to blame for this fraudulent charge that I wasn’t aware of, and now it’s actually hit my credit and ruined my credit," Elmer said.

If you are trying to decide what payment option is best for your situation, Joe Bert with Certified Financial Group suggests this: "The credit cards will charge a higher interest often times, and it’s easier to stretch those payments out over your lifetime making a minimum payment and that’s where people get into trouble with credit. You need to understand your ability to pay back. Now just because you’re short of cash right now. I would use the easy pay method, assuming you can make those payments in the future because if you can't, you just made a bad situation worse."

Here are three things the experts suggest you do before making a decision to use Buy Now, Pay Later for a purchase:  

1. Recognize needs from wants.
2. If you don’t have the money, don’t spend it.
3. If you can’t pay your bills, you may need to get another source of income.