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Gen Z and millennials prefer ‘buy now, pay later’ services

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From Klarna to Affirm to Afterpay, various “buy now, pay later” services are popping up as a popular alternative to traditional credit cards, especially among younger consumers.

These microloans allow users to split a purchase into multiple equal payments to be paid back over time, typically with little to no interest, and Gen Z and millennial consumers are the top users of the services, according to PYMNTS’ “Buy Now, Pay Later Tracker.”

Across generations, nearly 60% of consumers say they prefer to buy now, pay later over credit cards due to the ease of set payments, the simple approval process and lack of interest charges, according to a PYMNTS survey.

One reason young people in particular are drawn to buy now, pay later payment plans is because many watched their parents struggle with credit card debt amid the 2008 economic recession, says Christine Roberts, head of Citizens Pay, a buy now, pay later option offered by Citizens Bank.

Transparency about how long it will take to pay off a big-ticket purchase is also key for Gen Z and millennial consumers, Roberts says.

When it comes to expensive purchases, “this generation very much wants to understand the time frame of payments,” Roberts says. “The pay-over-time option allows it to fit into their budget and to know when the payments are going to end.”

Credit cards, on the other hand, typically calculate a minimum monthly payment based on the overall card balance rather than individual purchases.

However, as with credit cards, buy now, pay later users may risk accumulating debt without realizing it if they’re not careful.

Buy now, pay later services are engineered to encourage consumers to purchase more and borrow more, which can lead borrowers to take out several loans within a short time frame from multiple lenders that they may be unable to pay back, the Consumer Financial Protection Bureau warns .

It’s important to fully understand the terms and conditions of whichever payment plan you choose to use and stay on top of your payments to avoid potentially expensive late fees.

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