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Buy Now, Pay Later This Holiday Season

As shoppers fulfill their gift lists, some retailers and major credit cards will offer them the opportunity to defer payment on their purchases, according to AP News.

The scoop: Many retailers are seeking to take advantage of American interest in this flexible financial option financed by Silicon Valley startups and major credit card companies. Outfits that use this plan are attracting new interest weekly. Major retailers like Wal-Mart and Target are incorporating “buy now, pay later” services both as short- and long-term payment options.

The stats: According to a September study by Accenture, roughly 6% of all dollars spent online will be on buy now, pay later programs by the end of the year. Consulting group McKinsey says that buy now, pay later startups siphoned between $8 billion and $10 billion in revenue from the traditional banking method. 

Like layaway: Buy now, pay later is by no means a new concept. Retailers have administered fixed payments on big-ticket purchases for decades. Likewise, credit cards have offered this service. Rather than putting customers through the hassle of signing up for a credit card, however, retailers are adding direct financing options through third-party buy now, pay later programs like Affirm, Afterpay and PayPal at point-of-sale. 

The perks: The plan is a financially healthier option for the budget-crunched, impulse shoppers and those with credit trauma, giving them the ability to phase out remuneration. Industry advocates suggest that it is preferable to credit cards in that payments are fixed. Accrued interest, usually less than standard rates, is stated upfront, encouraging people to settle their accounts more quickly. Some services, like Afterpay, may charge a late fee. 

The politics: The House Financial Services Committee has gotten wind of the buzz created by buy now, pay later products. This week it held a hearing on the subject and encouraged the Consumer Financial Protection Bureau to keep an eye on the industry’s growth. 

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