LITTLE ROCK, Ark. — Americans have a love affair with shopping.
It’s the thrill of the hunt, snagging a secret sale, or the joy of finding the perfect present.
With Black Friday just over a week away, Justin Bishop, co-owner of the largest trading card shop dedicated to Pokémon in all of Central Arkansas, has already been anticipating the holiday shopping rush.
Bishop chose to offer the increasingly popular payment option called 'Buy Now Pay Later' at his store in Conway. He understands how members of the community might benefit from the installment payment methods.
“I know how hard it can be especially around the holidays to make big purchases. So I thought this would be a good way for the community to be able to get the items they want for their kids or for themselves," he explained.
Buy Now Pay Later is a short-term financing platform not unlike the old-fashioned layaway plans. Though the main difference is that the item becomes yours right away, with a small down payment and a promise to pay the rest in the future.
We spoke with Erika White, who works for one of the top Buy Now Pay Later companies called Affirm. She explained how Affirm’s zero-interest payment plan gives people flexibility, by letting them stretch their dollars over time, typically in four installments.
"It’s become a lot more mainstream than it was a few years ago, and what these tools are offering is a way to pay for something over time and a more flexible payment schedule than what traditional products offer, which is mostly 30 days”, White said.
Bishop began offering this payment option only weeks ago and said he's been blown away by the spike in sales, along with the number of new customers. While the platforms do charge the business a small fee, he explained how it's one he's willing to pay and recommends it to other small businesses like his.
“Absolutely! It's worth it. I don't think that it would be a bad thing for any small business to use it. It's definitely going to promote more sales than what a lot of small businesses are going to see during this time of the year," he added.
While there are upsides to Buy Now Pay Later, financial experts warn it could lead to overspending.
Teresa Arrigo is a financial advisor with GenWealth Financial and host of the “Talking Cents” podcast who explained how though the smaller payments may make the entire purchase price less impactful, you lose the initial 'sticker shock.'
"If you're looking at $75 a month, you don't realize you're paying $300. It doesn't feel the same. So there's a challenge to that," she said.
Arrigo works to educate Arkansans on managing money successfully, and she said Buy Now Pay Later apps are still new and might be too easy to use.
“You still owe somebody that money. You may have been able to walk away with only spending $75. But that item still costs you $300. And somebody's coming for the rest of it. So you are in debt to whomever you've taken that from. It is still a loan, it's just a super short-term loan," Arrigo described.
Arrigo recommends reading the fine print of any Buy Now Pay Later app because some apps charge fees for not paying on time. She also said that the true test of the platform's success during the holidays will come around March or April, when those installments are due in full.
"Depending on the dollar amount, it could be very impactful to your credit score. I would argue that instead of buying now and paying later on, save now and buy later. But I know for everybody, that's not reasonable," she said.