"Buy now, pay later" plans are growing in popularity among Gen Z consumers, driven by influencers on TikTok and Instagram promoting these services. But one personal finance expert says these services can carry serious financial risks for young people.
These services allow consumers to make big purchases and make interest-free payments in installments and typically don't require hard credit checks, if any, making them more accessible for young people who don't have a built-up credit score.
"It all started actually back with the initial lockdowns. We saw a big increase in online shopping. So, a lot of people got into the habit of it and now we're really seeing a target of Gen Z with these 鈥榖uy now, pay later鈥 services," said MoneySense executive editor Lisa Hannam in an interview with CTV's Your Morning on Friday.
On top of that, Hannam said these services are being glamourized by influencers on TikTok and Instagram making "haul" videos, showing off all the cool items that they bought with these apps.
But Hannam calls these services "baby credit with adult consequences," warning that they could put young people's financial futures at risk.
"The baby credit part that you get a taste of using credit and loans with no interest and very straightforward payments," she said.
The "adult consequences" come when consumers don't make their monthly or bi-weekly payments on time.
"There could be fees. There could be interest. It could be tied to your credit card, which could eventually end up with collections agencies, affect your credit score and ultimately affect bigger purchases down the line such as a mortgage, a car or anything like that," she said.
According to a survey released last September , a personal finance company, 34 per cent of 鈥渂uy now, pay later鈥 users in the U.S. have reported falling behind on one or more payments.
Younger consumers were found to be more likely to fall behind on their payments. The survey found that more than half of Gen Z and millennial respondents who have used these services say they missed one or more payments.
According to a survey conducted by the between September 2019 and March 2021, the most common items purchased through 鈥渂uy now, pay later鈥 were furniture or appliances, electronics and clothing or fashion items. Of the respondents who used these services, 74 per cent said they spent more than $200.
And the 鈥渂uy now, pay鈥 later industry is only expected to grow. According to a February 2022 report from market , the sector is expected to grow by 63.5 per cent on an annual basis in Canada.
Hannam said Canadians looking into these services need to read the fine print on the contract before signing on the dotted line.
"Make sure that you are reading the fine print that you are understanding the payment terms and when the payment has to come out," she said.
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The Lebanese militant group Hezbollah announced that it fired a barrage of missiles at a military base deep inside Israel early Sunday following an Israeli airstrike more than a day earlier that killed at least 37 people, including one of the militant group鈥檚 senior leaders as well as women and children.
A sea lion swam free after a rescue team disentangled it near Vancouver Island earlier this week.
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A northern Ontario man is facing a $12,000 fine after illegally shooting a moose near the Batchawan River.
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Donald Trump returned to North Carolina on Saturday, stumping in the southern battleground state with direct appeals to women, claiming he would be a better champion for them than U.S. Vice President Kamala Harris, who is vying to become the first female president.
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The Lebanese militant group Hezbollah announced that it fired a barrage of missiles at a military base deep inside Israel early Sunday following an Israeli airstrike more than a day earlier that killed at least 37 people, including one of the militant group鈥檚 senior leaders as well as women and children.
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Lebanese authorities on Thursday banned walkie-talkies and pagers from being taken on flights from Beirut airport, the National News Agency reported, after thousands of such devices exploded during a deadly attack on Hezbollah this week.
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Tattoos are becoming more common in today's society and, as a result, appear to be more acceptable in the workplace than they used to be.
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The St. Clair College golf teams were successful at the Niagara Knights Invitational tournament on Friday.
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The Red Bridge, a historic landmark in Kamloops, B.C., was completely destroyed by fire early Thursday morning.
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Despite the heavy rain, plenty of muscle turned up for United Way鈥檚 annual Pull the Bus fundraiser in Lethbridge Friday.
Lethbridge County has rescinded its fire restriction as a result of the recent cool, wet weathr.
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A northern Ontario man is facing a $12,000 fine after illegally shooting a moose near the Batchawan River.
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A 26-year-old driver from Surrey, B.C., has been charged with three counts of criminal negligence causing death and bodily harm in a crash that killed two youths in northern Ontario last year.
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Jim Lester鈥檚 farm hopped on the cow-cuddling trend in early August, and his time slots have been pretty well sold out ever since.
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