August 15, 2022


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The potential downsides of buy now, pay later programs like Affirm and Afterpay – CNBC

This is an excerpt from CNBC Make It's weekly newsletter. Subscribe here.Since she discovered buy n.......

This is an excerpt from CNBC Make It’s weekly newsletter. Subscribe here.

Since she discovered buy now, pay later, or BNPL, programs two months ago, Erica Park has used them to finance $700 worth of purchases, including clothing, an air purifier, vacuum and juicer. The installment plans have made her self-described shopping addiction easier to justify.

“I am able to afford all my impulse buys, which is awesome. I definitely should be saving instead,” the 27-year-old Arizona resident says. “I use it because it doesn’t make me feel as guilty, since it is a small amount due upfront and you instantly get the product.”

Park is far from alone in her enthusiasm for these programs. Check your favorite shopping websites, and chances are you’ll see the option to finance products using Affirm, Afterpay, Klarna or one of the other BNPL companies; they have exploded in popularity over the past year, according to industry research. 

But shoppers should be careful. While BNPL programs are convenient, they could lead to overspending.

Typically, these programs enable customers to buy products online and in some stores, and spread the payments over a small number of fixed installments. But terms for all of them, including interest, fees and credit reporting, differ, which can complicate things for customers who have to keep track of everything on their own, says Charlotte Principato, financial services analyst at Morning Consult.

The loans are …….