‘Buy now, pay later’ services are getting popular. Can you manage the risk? – National

Canadians are feeling the pinch from the climbing cost of living, with growing numbers of people turning to ‘buy now, pay later’ approaches to their spending.

Experts warn that while it can help ease the up-front pressure, it can be a risky tactic in the long run.

“I have noticed that it’s on every single retail website, and if one is not disciplined, I can see how it’s so easy for people to agree to buy now, pay later because the payments look so low,” said Stacy Yanchuk Oleksy, CEO of the Edmonton-based non-profit credit counselling agency Money Matters.

“If one is struggling financially and they’re told that if they paid $5 or $10 a month, it’s a really easy hook for people to make that purchase. However, my concern with those buy now, pay later apps is that people lose track of what they’ve committed to.”

‘Buy now, pay later’ offers are not new — effectively, it is a loan or a credit line normally used for a large purchase.

“Our mortgages are the original ‘buy now, pay later,’ and it seems like companies have found a way to capitalize on that concept,” said Kelly Ho, a Vancouver-based certified financial planner.

‘Buy now, play later’ offers have increased rapidly during the years since the pandemic.

According to research from Morgan Stanley, ‘buy now, pay later’ loans financed two per cent of all e-commerce sales in 2020.

By 2024, that was up to six per cent.

Canadians are coming to rely on it more and more, too.

By the end of this year, the ‘buy now, pay later’ market in Canada is expected to grow 12 per cent annually to US$7.5 billion, a report by market research service R&M said.

Typically, consumers might ‘buy now, pay later’ for big purchases like TVs, laptops and other expensive electronics.

But research suggests Canadians are dipping into these services for small purchases such as takeout.

Canadian fintech firm Koho, which offers ‘buy now, pay later’ services, said the share of eligible users using that option has risen from 38 per cent to 44 per cent in the last six months.

The top categories for which Canadians used ‘buy now, pay later’ at Koho were groceries, telecom and restaurants. Based on a sample size of 10,000 users, the average transaction was $187, and the average loan amount was $345.

While ‘buy now, pay later’ services can break up a big payment and help you get through a rough patch, making it a habit could lead you into a debt trap, Oleksy said.

“Credit is neither good nor bad. It is just a tool. A good butter knife spreads good butter on your bread, but you drop it on your foot and it can stab you in the foot,” said Oleksy.

And while the lure for financially stressed Canadians can be strong, the payments can easily add up to financial pain down the road, said Ho.

“If you have 15 or 20 of those ‘buy now and pay later’ for the 15 or 20 items that you purchased off of different websites … no matter how organized you are, unless you have a very meticulous spreadsheet detailing every single payment, we have a problem,” Ho said.

And if you miss a payment? “That’s where they get you,” Oleksy said.

“If you use it perfectly, it’s a decent tool every once in a while. It’s when you miss a payment — that’s where, boom, the interest tacks on,” she added.

For some users, ‘buy now, pay later’ loans could be a way to avoid even riskier credit card debt.

“In a way, if one is disciplined, ‘buy now pay later’ could help people mitigate those 20 per cent credit card interest rates,” Ho said.

According to an Equifax report released Monday, 1.4 million Canadians missed credit card payments in April, May and June of 2025. While that is 7,000 fewer than last quarter, it is 118,000 more than in the same period last year.

“’Buy now, pay later,’ if it’s used very, very strictly, isn’t a bad product. It allows someone to break up a payment into equal payments. It might allow someone to delay a payment or even get (something on) zero per cent interest,” Oleksy said.

Keeping the ‘buy now, pay later’ option only for bigger purchases can help mitigate the risks, she added.

“Most of us don’t have $1,500 or $2,000 to just drop on a laptop. So maybe you break it up into four payments and that just makes it easier. And you still get what you need for work, school or life. It’s just when it becomes a habit, when you’re relying on it for the small day-to-day purchases, that’s where I start to worry,” she added.

With the new school term starting in a few weeks, parents and students across the country will be heading to stores for back-to-school shopping. Planning ahead of time, instead of dipping into ‘buy now, pay later’ loans, can help relieve the financial stress that comes with repayments.

“We know that back-to-school is an annual event when you have school-age children. So it’s not a surprise that this event is coming up. And like with anything else, planning in advance is key,” Ho said, urging parents to start squirrelling away money ahead of time to spend in August or September.

Buying some school supplies second-hand or used could also be a great option, she added.

“Don’t spend money that you don’t have,” Ho said.