Unfortunately, that’s not how it’s usually used. Consumers are often lured into impulse buying when allowed to pay later, and they shop across multiple platforms, which can lead to confusion about the terms they're agreeing to.
More than half of Gen Z and millennial respondents in a survey last year by Credit Karma said they’ve missed at least one payment on such plans. A separate report from LendingTree earlier this month found that just 46% of respondents were very confident and 34% were somewhat confident they would be able to pay off their buy-now-pay-later loans in full without missing a payment.
The payment networks aren’t required, as credit-card issuers are, to assess a borrower’s ability to repay. So they won't necessarily know how many other short-term loans or other credit have been extended to the shopper.
Finally, given the lack of oversight, buy-now-pay-later consumers aren’t as protected when something goes wrong with a purchase as they are when paying with credit cards. If a product doesn’t meet expectations, credit-card users usually have an easier time disputing a payment. Returns can also be complicated when using buy now, pay later, especially if payments are still being made.
While it sounds enticing to get something interest-free now and foot the bill later — especially as interest rates head higher — this is a growing area where consumers have fewer safeguards. Until regulators provide more guardrails, proceed with caution.
Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.