Nov 30, 2021 - Economy & Business

Retail's IOU boom

Image of people waiting in line at a store with masks on.

Black Friday shoppers in Skokie, Ill. Photo: Joel Lerner/Xinhua via Getty Images

Here's a staggering stat: Americans' use of "buy now, pay later" options increased 438% between November 2019 and November 2021, according to an Adobe analysis reported by Retail Dive.

Why it matters: This is one of the biggest new trends in shopping right now. People are getting more and more comfortable with apps like Afterpay, Klarna and Affirm that facilitate "buy now, pay later," and let customers spread out the cost of purchases over a long period of time without a credit card.

  • Consumers may be using these payment plans to deal with higher price tags due to inflation, notes Retail Dive.
  • It's also simpler to just select the "buy now, pay later" option at checkout than to apply for a credit card. These companies often don't run rigorous credit checks before letting people use their services.

But, but, but: There are downsides to using these kinds of apps, such as buying stuff you can't afford.

  • Two-thirds of U.S. users of "buy now, pay later" apps said they spent more money than they would have otherwise while using them, per a Lending Tree survey.
  • On top of that, the companies that offer this service don't usually report users' timely payments to the credit bureaus, so you can't really build credit this way, CBS reports.

The bottom line: "Buy now, pay later" is giving a lot of shoppers more choices and peace of mind this holiday season, but that comes with caveats.

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