Gephardt: Is buying now, paying off retail loans worth it?


SALT LAKE CITY – With the pandemic push more people to shop online, the “buy now, pay later” payment option is increasingly popular.

But do these retail loans make financial sense to buyers?

The option allows buyers to divide their purchases into interest-free payments. So, what to worry about?

Companies like Affirm, Afterpay, PayPal Credit, and Klarma will split payments from shoe purchases to Peloton bikes.

It works like a layaway, except you actually get the item before you complete your payments. You won’t want interest, so how do these companies make money?

Ted Rossman, senior analyst at, has the answer.

Tedd Rossman, Senior Analyst at
Tedd Rossman, Senior Analyst at

“The store takes a bit of a haircut,” he says. “He gets about 5 or 6%, but the upside is that they are getting the money now and they are booking a sale.”

There is a trap for buyers: fees.

“The late fees, however, can start right away,” Rossman said. “They may also ban you from future transactions on the platform.”

Being late can also mean deferred interest and penalties. Plus, you won’t get the same benefits as a credit card.

“You might be sacrificing rewards,” he says. “You risk missing out on other protections for buyers such as fraud protection, extended warranties.”

There is an inherent danger in buying something now that you may not be able to afford with the promise of paying later.

–Ted Rossman, senior analyst at

The biggest concern is that the buy now, pay later option often means a flexible credit check or no credit check at all. There isn’t really a solid review of your financial situation to see if you can really afford that $ 2000 exercise bike.

“You have to be careful,” Rossman said. “There is an inherent danger in buying something now that you may not be able to afford with the promise of paying later.”

The rise of buying now, payments later has not escaped the attention of the big banks. Many, like Citibank, Chase, and American Express, now offer the option to repay a purchase in installments without interest.

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Matt Gephardt

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