The option allows shoppers to split payments for purchases into installments over a period of time, but that convenience could be risky.
"Someone should really consider whether this is the best mechanism for paying," says Cynthia Chen, CEO of Kikoff.
While these smaller payments are often interest-free and come with a quick approval process, it can encourage reckless spending and potentially impact your credit history.
"It is very easy to get into impulsive purchase behaviors with 'Buy Now, Pay Later' because it allows you to pay for something by borrowing from the future," Chen said.
Chen says some "Buy Now, Pay Later" providers are starting to report payment information to credit bureaus.
"No need to panic now because those tradelines are not being seen by the lenders who will be looking at consumer credit reports," she said.
However, that will change. FICO recently announced it will start including BNPL in scores starting in fall of this year.
"When you miss a payment, it will show up on your credit report if the 'Buy Now, Pay Later' lender that you're working with reports to the credit bureaus," Chen said.
While some use the loan as a bridge to the next paycheck, Chen says that leads to the potential for a consumer to accumulate debt if they're buying things they otherwise wouldn't be able to afford.
More payment deadlines also mean more of a greater chance of missing a payment.
According to a Lending Tree survey, 41% of "Buy Now, Pay Later" loan users say they paid late on one of them in the past year. That's up from 34% just a year ago
"People need to be cautious about making sure they're making on-time payments," Chen said.
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