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

Hugh Dobbie’s South Surrey-based tech business Yare Media was recently acquired by California’s Visaic Inc. (SFU photo)
South Surrey tech company acquired by California business

Hugh Dobbie founded Yare Media in 2016, and ‘will remain involved’

Fraser Health has declared a COVID-19 outbreak at Newton Elementary School in Surrey, according to an information bulletin Friday, Nov. 27, 2020. (Image: Google Street View)
COVID-19 outbreak declared at second Surrey elementary school

Newton Elementary closed for two weeks, set to reopen Dec. 14

Joy Johnson, seen here during an installation ceremony on Oct. 22, is Simon Fraser University’s 10th president and vice-chancellor. (Submitted photo)
SFU’s Surrey campus tackling COVID-19-related research

‘We can learn now,’ SFU president Joy Johnson said, ‘so should something like this happen again we’ll be prepared. We have to learn from this current pandemic’

Mayor Darryl Walker gives a welcoming hug to Semiahmoo First Nation Chief Harley Chappell at the inaugural meeting of the current White Rock council in 2018. (Alex Browne photo)
White Rock council under fire for inaugural prayer

BC Humanist Association charges city violated Supreme Court ruling two years ago

Chief Robert Gladstone of Shxwha:y Village at a federal flood funding announcement April 24, 2019. (Jenna Hauck/Chilliwack Progress file)
Consortium of Indigenous chiefs seeking a way to participate in cannabis economy

All Nations Chiefs from the Shxwha:y, Cheam, Soowahlie and Sq’ewlets holding online forum Dec. 2

A woman wears a protective face covering to help prevent the spread of COVID-19 as she walks along the seawall in North Vancouver Wednesday, November 25, 2020.THE CANADIAN PRESS/Jonathan Hayward
911 new COVID-19 cases, 11 deaths as B.C. sees deadliest week since pandemic began

Hospitalizations reach more than 300 across the province

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Help make children’s wishes come true

Black Press Media, BraveFace host mask fundraiser for Make-A-Wish Foundation

Screenshot of Pastor James Butler giving a sermon at Free Grace Baptist Church in Chilliwack on Nov. 22, 2020. The church has decided to continue in-person services despite a public health order banning worship services that was issued on Nov. 19, 2020. (YouTube)
2 Lower Mainland churches continue in-person services despite public health orders

Pastors say faith groups are unfairly targeted and that charter rights protect their decisions

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

A big job: Former forests minister Doug Donaldson stands before a 500-year-old Douglas fir in Saanich to announce preservation of some of B.C.’s oldest trees, July 2019. (B.C. government)
B.C. returning to ‘stand-alone’ forests, rural development ministry

Horgan says Gordon Campbell’s super-ministry doesn’t work

Alexandre Bissonnette, who pleaded guilty to a mass shooting at a Quebec City mosque, arrives at the courthouse in Quebec City on February 21, 2017. THE CANADIAN PRESS/Mathieu Belanger - POOL
Court strikes down consecutive life sentences; mosque shooter has prison term cut

The decision was appealed by both the defence and the Crown

Gold medallists in the ice dance, free dance figure skating Tessa Virtue and Scott Moir, of Canada, pose during their medals ceremony at the 2018 Winter Olympics in Pyeongchang, South Korea, Tuesday, Feb. 20, 2018. THE CANADIAN PRESS/AP-Charlie Riedel
Olympic champions Virtue, Moir and Tewksbury among 114 Order of Canada inductees

Moir and Virtue catapulted to national stardom with their gold-medal performances at the Winter Olympics in 2018

Shoppers line up in front of a shop on Montreal’s Saint-Catherine Street in search of Black Friday deals in Montreal, Friday, Nov. 27, 2020. THE CANADIAN PRESS/Paul Chiasson
Black Friday shopping in a pandemic: COVID-19 closes some stores, sales move online

Eric Morris, head of retail at Google Canada, says e-commerce in Canada has doubled during the pandemic.

Chilliwack school board trustee Barry Neufeld is taking heat over using a ableist slur to refer to three Black Press employees. (Paul Henderson/ Progress file)
BC School Trustees Association president keeps heat on Chilliwack Trustee Barry Neufeld

In a news release, Stephanie Higginson called on voters to take careful note of Neufeld’s behaviour

Most Read