In the mid-2000s, online shopping exploded into the mainstream and is now a popular choice for a growing number of consumers with the opportunity to purchase goods and services from the comfort of their own homes now highly accessible and readily available at the touch of a button. It is the recent introduction of paying for online purchases at a later date or in incremental stages, however, that has had a profound impact on the shopping behavior of consumers on a global scale. It is, put simply, an alternative to credit or debit cards that provides you with the flexibility to shop for whatever you want whenever you want even if you don’t currently possess the funds to do so. If you are curious as to how the relatively modern phenomenon known as buy now, pay later has affected both retail habits and personal finance, continue reading to find out everything you need to know.
It can encourage overspending
If you have ever gone to complete an online shopping purchase only to find you have exceeded your budget, you may have been tempted to opt for one of the many buy now, pay later options presented to you as you prepare to submit your personal details. It is, essentially, the type of situation that these platforms have been designed for and can allow you to purchase any time-sensitive goods or services without worrying about whether you can afford to do so at the present moment. It has, however, also attracted a great deal of criticism for encouraging overspending with consumers purchasing a greater number of products or choosing higher value products than they usually would if they were intending to pay for their basket through a traditional payment method such as a credit card, debit card, or bank transfer. It is, therefore, worth remembering that whilst paying $20 a month for a year may sound better than a downright payment of $240, you will still be spending the exact same amount of money in the long run.
It can damage your credit score
If you are in the process of saving for a milestone event, such as purchasing a property, it may be worth steering clear of the various buy now, pay later options available to you at the till. It is, after all, a well-known fact that in order to receive a mortgage, your personal finances will be subject to a credit check with any loans, missing payments, late fees, and evidence of spending more than you can afford scrutinized before a final decision is made. It may, however, benefit you to know ahead of time that paying for goods and services at a later date can also lower your score with lenders less likely to offer you a mortgage if you have missed a payment or failed to repay what you borrowed within a specified timeframe. In addition, this information may remain visible on your credit report for up to six years for future lenders to see and, more often than not, deliver the same disappointing news as you struggle to seek approval for future credit, such as a mortgage or a loan.
It has driven younger shoppers
In the years since buy now, pay later exploded into the mainstream in the mid-2010s, it has geared its marketing efforts towards young adults and, as a result, has driven younger shoppers to transform their online shopping habits. It is the 18-34 age bracket, in particular, however, on which it has had the greatest impact with a wide range of e-commerce giants and fashion retailers with young adults as their intended target audience pushing a variety of buy now, pay later options onto its customers by advertising on relevant websites, social media platforms, and even physical billboards. In addition, the 65 and older age bracket has been less likely to oblige and get involved in this trend that appears to be sweeping the online shopping landscape. It is also worth noting that whilst the vast majority of younger shoppers that venture down this route do so because they are low on funds, a growing number of consumers are doing so selectively.
It can allow you to benefit from no-interest financing
It can be difficult to avoid paying interest whilst financing but by buying now and paying later, you can benefit from no-interest financing. It is, after all, essentially a no-interest loan that must be paid back over a predetermined length of time. It means that if you possess a relatively strong credit score, you may be entitled to a longer interest-free or low-interest loan in the long run with 36 months not necessarily unheard of in today’s online shopping landscape. If you can afford to pay for the item you are purchasing and you genuinely need it as opposed to just wanting it, it may end up actually boosting your personal finances.
In recent years, the modern phenomenon of buying goods and services but paying for them at a later date has become the norm for online shoppers. It has, however, been criticized for encouraging overspending, damaging your credit score, and driving younger shoppers. In contrast to this, it has also been praised for its ability to allow consumers to benefit from no-interest financing by purchasing items they genuinely need at a time and pace that suits them.
