Download, sign up, buy now, pay later
Here’s a step-by-step look at how the increasingly popular payment apps work.
WASHINGTON — If you’ve been in the mall or scrolling through online shopping sites recently, you might have seen brightly colored ads urging you to split your purchase into four payments with buy-now-paylater companies such as Quadpay, Afterpay, Klarna, Affirm and Sezzle.
Designed to attract young shoppers in stores and online, the apps promise a safer, easier alternative to credit with no interest and no surprise fees. They are growing in popularity in the United States, prompting a dialogue on how to balance the services’ advantages with consumer protection concerns.
Here’s a step-by-step look at what happens when you use one of these services.
How customers sign up
Customers must first download one of the apps and create an account, providing their full name, email address, phone number, date of birth and billing address. Typically, the apps text and email verification codes to the account holder to ensure the contact information is correct and prevent fraud.
Before making a purchase, app users must provide valid debit or credit card information that will be used for payments. Depending on the payment plan, some companies may request your Social Security number.
You also accept terms and conditions and determine whether the apps can send push notifications to you.
Behind the scenes, apps perform a so-called soft credit check and run customer information through their risk algorithms.
For a first-time user, the entire process takes less than 10 minutes.
How to pay for purchases
Some apps offer long repayment plans with interest on big-ticket items. But the most popular buy-now-paylater plans consist of four installments, with each payment covering 25% of the total transaction. The first installment is due immediately upon checkout.
After that, the remaining installments are due every two weeks. Many apps encourage customers to sign up for automatic payments so users do not have to go into the app and approve each installment charge to their debit or credit card.
How the apps make money
There are several ways that the apps make a profit.
Like credit cards, buy-now-pay-later companies charge merchants a fee on every transaction, usually 2% to 8% of the purchase amount.
Some apps also charge users a fee to use their platform. Quadpay, for instance, charges a $1 platform fee with every installment payment.
When users miss payments, they are also subject to late fees, which usually start at $5 to $15, depending on the app. Those fees can increase if a customer continues to default on installments.
How they compare with credit cards
Buy-now-pay-later services usually approve purchases on a one-time basis, meaning users must request approval from the companies for every transaction.
In contrast, credit cards are a form of revolving credit. That means customers can use their card for multiple purchases until they hit their credit limit.
Credit card companies and banks consult your credit history to determine whether they should offer you a card and, if so, to set a credit limit.
Buy-now-pay-later services may also review your credit history, but pay-in-four plans typically do not perform a “hard” inquiry to establish a line of credit, which would affect your credit score. Instead, most of the apps use their own algorithms to determine whether they should approve your purchases.
That means that it is often much easier for people with no credit history or a bad credit score to receive approval through the services.
Lastly, buy-now-pay-later services lack some of the protections that credit cards offer, including for billing disputes.
The photos of the living gray whales captured perfectly every event that we too experienced when our boat from San Diego anchored for three days, at the end of February 2020, in the San Ignacio Lagoon in Baja California as part of an annual excursion organized by the Cabrillo Marine Aquarium in San Pedro.
The feelings we had watching a gigantic mother gray whale glide under our boat and stroking her calf are hard to put into words. It is truly disheartening to read about the mysterious mass die-offs of these astonishing mammals.
Steve and Diana Felszeghy Whittier
I read the article about whale deaths with sadness and regret, but not surprise.
I don’t believe I’m an alarmist, but isn’t the Earth dying? The climate, the water, the disappearing resources?
I thought scientists had long since decided that humanity had only so long to survive on its current trajectory. Am I missing something?
It’s certainly worthwhile to detail the decline, but to feign alarm over what we’ve done to the world seems, at this point, delusional. This game’s over.
Kevin Moran Costa Mesa
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I understand the importance of the scientific method and not jumping to conclusions, but it seems illogical not to at least mention that there is a chance, a very good one at that, that whales are starving and searching for food in every corner of the ocean because humans are overfishing.
Beth Levine Rockville, Md.