Is the future to buy now and pay later? Economists warn that this feature is not suitable for the long term.

Many have found the new “buy now, pay later” option convenient and useful on almost every ecommerce site, with prices rising due to inflation and supply chains still chocked by the COVID-19 pandemic. But Harvard economists warn that while such a choice can be attractive, it can also be risky for consumers in the long run.

During the onset of the pandemic, this option allowed people locked up at home to still make big purchases despite the physical stores closing and to spread these payments over time, but now consumers are more I’m also using options when buying a lot. Everyday items from Target, Walmart and Amazon are making the situation even more problematic.

“Three years ago people talked about Peloton bikes, but now they’re buying sneakers, jeans and socks,” said Marshall Lux, a fellow at Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. CNBC.

The problem is that the growth of these programs, mainly offered by Afterpay, Affirm and Klarna, is being driven by younger consumers. .

“These people can’t afford to be hurt,” Lux added.

One problem is that according to a survey of Lending Tree, 70% of users now admit they are spending more than they would if they had to pay everything upfront, and 42% who chose one of these loans were also delinquent on one of these loans. This makes you more vulnerable to late fees, deferred interest, or other penalties, which can scratch your credit report if a credit check is performed, which in turn can have a significant impact on future loans and purchases.

“They won’t come to buy sneakers. The fact is that they can buy something and now they know what happens when they default. For the average person who works to get a paycheck, that’s a problem,” said Lux. “It feels a little wild to me.”

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