Reviews — Pros and Cons of Buy Now, Pay Later Apps

  • The Pay in 4 option allows customers to purchase more items.
  • There are downsides to these payment options.
  • Overspending and penalties could be a factor.

The demand for buy now, pay later options continue to increase. There are many platforms that are offering these options. However, there are pros and cons with each option. These include Klarna, Afterpay, Quadpay, and, of course, PayPal. Among these, Klarna made its debut in the Super Bowl with an ad earlier this month.

The Afterpay Interface.

Klarna is one of the best platforms thus far. The platform offers to pay in four options, including buy now and make payments every two weeks. There is no interest on purchases, as long as the payments are made and paid off within two months. If the payment is missed, there is an $8 penalty.

The customer also earns reward points for the each dollar spent, and can redeem the points for a variety of online gift cards, including Amazon, Walmart, and so on.

There are three ways of using Klarna. Some retailers, like Coach, allow shoppers to pay directly from their website by choosing Klarna at the checkout. Another option is using the Klarna app and the app browser and creating a one-time use credit card to pay for the purchase.

Recently, Klarna rolled out pay in store using Klarna, but it is not as convenient. There is no credit check associated with these options. There is an option to extend the payments to six months, but that requires a credit check and there is an interest attached.

At the same time, there is a downside using Klarna. One of the major obstacles is when a customer has an issue with an order. When using Klarna, the first payment is taken when the item ships from the vendor. If an Android phone is used, the tracking of the purchase can be done via the Klarna app.

Thus, if your order does not arrive or is damaged, there is an option to go to your purchase and, through the drop down menu, choose an option: either an issue with the order or the order never arrived. You are prompted to contact the vendor to either get replacement, refund, or to initiate the return.

In the case that all goes well, the vendor refunds Klarna and your first payment is refunded back to the debit/credit card on file. However, if there is an issue and the vendor refuses to refund, it is a nightmare.

During business hours, there is in app chat option to chat with a Klarna customer service representative and Klarna can open a dispute on behalf of the client. However, if it is unsuccessful, the customer looses the right to dispute the payments in four through the financial institution.

The only option is to cancel the card, but then it could lead to areas and even collection agency contacting the customer. This is one of the largest downfalls.

In addition, Klarna never allows the customer to see the credit limit. Klarna does not disclose the algorithm it uses, which determines the spending limit. Customers, when choosing the Klarna payment method, could be declined without knowing what the limit of the spending is.

This could be uncomfortable, especially during the in-store payment experience. Also, while using the app, a high demand item can be sold out.

Afterpay is another popular platform to use. It allows the customer to pay in four and also allows consumers to choose the method at the checkout. The popular athleisure brand Lululemon now offers both Afterpay and Klarna options at the checkout. A disadvantage of Afterpay is it has a very unfriendly user interface and it offers far fewer rewards than Klarna.

The QuadPay interface.

Quadpay is another option, which allows a pre-approval option. This is a convenient option and takes away the guessing game of Klarna and Afterpay’s spending limits. Paypal rolled out a pay in 4 version too, which has its pros and cons.

There are other buy now, pay later options, such as Affirm, that will do a soft credit check in order to offer the approval. This method is convenient when making large purchases online, like furniture or other big ticket items.

Overall, these are all great alternatives to using a credit card and saving interest. Nevertheless, constantly buying on an installment plan can lead to possible financial troubles down the road, and the payments can end up being too much.

Since there is no credit check, the app does not know the customer’s financial situation and could offer large spending amounts that would be hard to pay off and could lead to default on other bills.

Online shopping is a great way to purchase items, but it is important to be responsible in spending.

Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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