What the Tech: Buy Now, Pay Later
Many Amazon shoppers are seeing a new button at checkout, Buy Now, Pay Later. It sounds like a great deal: buy something today, have it shipped tomorrow, and pay it off over time. But experts warn that convenience can turn into debt faster than you think.
Amazon now offers several payment options that let shoppers split their purchases over a few months or even a few years. The retailer has partnered with Affirm and also expanded its own Amazon Monthly Payments program. Depending on what you buy and how you qualify, you could pay off an item over five months, twelve months, or longer.
For example, a $1,300 TV could be yours tomorrow with payments of about $108 a month for a year using an Amazon Prime Visa Card. Without that card, you could choose Amazon Pay and pay $260 a month for five months. Or, go through Affirm and stretch payments over three years for about $36 a month.
That last option might look tempting, but it comes with a catch.
Those extended plans are loans, and they often carry interest rates between 10 and 36 percent. By the time the balance is paid off, that “$1,300 TV” could end up costing close to $2,000.
Amazon’s own Monthly Payments program is interest-free, but it’s not available to everyone. Eligibility depends on your Amazon account history and payment record. The purchase amount must also meet specific criteria, and you’ll usually need to make the first payment at checkout.
If you pay with a debit card, that first payment, and each one after, comes directly out of your checking account. Miss a payment, and you could face overdraft fees from your bank and late fees from Amazon. You can’t switch cards once the plan begins, and if you close the account or remove the card, Amazon can charge the entire remaining balance immediately.
Experts say Buy Now, Pay Later programs have exploded in popularity with younger shoppers who don’t have, or don’t want, credit cards. These plans make expensive items feel affordable — but that’s what worries financial advisors.
A few small installment plans can quietly add up to hundreds of dollars in bills each month. And starting this fall, FICO will begin including BNPL loans in its new credit-scoring models, meaning missed payments could lower your credit score.
Buy Now, Pay Later isn’t necessarily a bad idea, but it’s still a loan. If you wouldn’t put it on a credit card, you probably shouldn’t split it into payments either.
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