Buy Now Pay Later Options Becoming More Popular In-Store and Online

Online holiday shoppers offered installment payments

NBC Universal, Inc.

Whether it is an electronic bike, a new iPhone or pair of shoes, shoppers have more opportunities to buy items now and pay for them later.

It's always been an option for shoppers using a credit card, but now shoppers have more options through Point of Sale payment plans offered online or through shopping apps.

"They've really exploded onto the scene in the past year or so," said Matt Schulz with Lending Tree. "They are clear, transparent and easy to understand."

So instead of using your credit or debit card, or using a service like PayPal, shoppers can make installment payments offered through the online retailer.

"The truth is that there are a lot of people out there who, in this funky economic time, just don't want to deal with a credit card," said Schulz.

Companies like Klarna, Afterpay and Affirm offer shoppers the opportunity to break up their payments. The offer often comes at the online checkout stage of the transaction. Matt Schulz said the Point of Sale offers are generally well explained including possible interest rates and fees. Some companies require monthly payments, others require payments every two weeks.

"I think the target for a lot of these loans is probably young consumers," said Schulz. "And maybe folks who don't have a whole lot of credit or just don't want to deal with a credit card.

Retailers like Sephora, H&M and Target are offering installment payment plans. Schulz said the advantage for retailers is the fact that people may spend more when using an installment plan. According to one study, some of the most popular installment purchases are electronics, home appliances and furniture.

Schulz said another benefit for these Point of Sale deals is that the installment loan does not require a "hard credit check" on your credit report, which means it will not impact your credit score. That would change, however, if payments are late.

Debit card users may be more likely to use the installment options. The loan has a set cost and ending point which is spelled out before consumers agree to the terms. Schulz said details of the loan vary between lenders. It is still a loan and should not be taken lightly.

"It is important that you take the time to look into the individual lender that you are talking about before you apply," said Schulz.

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