The Hidden Psychological and Financial Tricks Behind Zero Interest ‘Buy Now Pay Later’ Programs

Former accounting consultant Grant Rudow explained the advantages and disadvantages of buy now, pay later" programs. On one hand these loans are easy to get, the balance is carried at 0% interest, and it breaks down large purchases into smaller, more affordable payments.

Buy now pay later is a short-term financing option that is offered by companies like Affirm, Klarna or Afterpay. You'll typically see these options pop up on e-commerce stores, offering you the ability to buy what you want today while deferring your payment over a certain number of installments. ...The buy now pay later programs offer an almost instantaneous approval for your purchase in the moment.

On the other hand, however, late fees on these loans are very costly and the consumer's buying data is shared with other companies, and the loan can be sold to bigger banks. These programs use various checkout tricks to guide the consumer's eye to the right place and make it very convenient to pay smaller items, such as food delivery.

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Additionally, many of those who use these programs, tend to be juggling quite a few at a time, which can lead to a chokepoint of debt.

Consider that someone who's financing a burrito is also probably financing a lot of other things. That's when the real problem starts to arise bad spending habits like this lead to what we call loan stacking pretty much what it sounds like taking out loan after loan after loan and stacking them on top of each other and because buy now pay later programs make it so easy to do so most consumers don't even realize how much debt they're actually accruing.