Online shopping: pay later is booming
Many online shops offer customers the option to pay later. But this payment method is not beneficial for everyone.
“Buy now, pay later” for greater flexibility when shopping online
Who hasn’t been there? Your smartphone is broken, and you need a new one quickly. Or an item saved to your wishlist is finally back in stock online, so you snap it up quickly, before it is gone again. But not everyone has the bank balance to just pay for impulse purchases out of their living money.
So many online shops offer customers a variety of different payment methods to choose from. For example, customers have the classic “purchase on account” option to settle their payment, generally 14 days after receipt of the goods. In recent years, providers including Klarna, PayPal, and Ratepay have started offering customer-friendly payment options. These offer greater flexibility when shopping online: by using the relevant app and their personal account, users can see all the purchases that they have made from, say, Klarna, at a glance. Far more tempting, though, is the “buy now, pay later” option, where purchases can be paid for later, usually after 30 days, or even paid in installments. Using the “pay later” option lets you postpone payment of the purchase, easily and without cost, for a certain period of time – if the payment deadlines are adhered to.
According to a recent survey by the German credit agency Schufa, 27 percent of those surveyed have used the “pay later” option in the past six months.
The “pay later” option is mostly chosen by young people
Wear your new sneakers now, but wait a month before paying for them? It sounds tempting when your bank balance is looking a bit meager. After just a few clicks and choosing “buy now, pay later”, your items are on their way and payment is off your mind – for now, anyway. The purchase is made without having to pay for it immediately – what a good deal. It’s not a problem for those who know that postponed does not mean canceled, and that the item must be paid for in 30 days.
It’s more difficult for those who have racked up their “pay later” online purchases and overestimated their financial situation. And the payment deadline has elapsed and, on top of that, they are charged late fees. So there are often additional costs, making the purchased item more expensive than originally thought.
According to the Schufa survey, those affected are mainly young, Internet-savvy people who are less experienced in dealing with finances and underestimate the risks associated with these payment methods. It is a similar situation with Klarna and PayPal installment plans, where a fixed installment amount must be paid each month. There is usually an interest charge for this, which increases the original price. Shoppers who buy items on installment will increase their monthly fixed expenses in no time at all and may accumulate debts. What’s more, the survey noted that in the last six months, 22 percent made their online purchases using payment installments.
Likewise, a survey by Bitkom (Germany’s digital association) also shows that many young people are somewhat naive when it comes to online shopping: 13 percent of online shoppers between the ages of 16 and 29 return ordered items more often than the average. The most commonly stated reason for the return was that they no longer liked the item. From a sustainability perspective, online returns are considered to be unnecessarily resource-intensive orders.
EU reviews its future guidelines for installment purchases
According to the survey, the number of “mini-loans” is increasing, despite the COVID-19 pandemic and inflation. Stricter rules should apply in the future for “buy now, pay later” plans, to protect consumers: For mini-loans under 200 euros, a credit check is also carried out, which assesses the creditworthiness of the individual. People who cannot actually afford this credit should not be allowed to pay later.
Pay later? Best not to make it a habit
For many consumers, the “pay later” option is an attractive alternative as a payment method and can be quite useful. However, to avoid additional costs, the payment deadlines must be strictly adhered to. Klarna, PayPal, and other providers list previous online purchases and their payment deadlines, allowing shoppers to keep track of their account.
