Apple Launches Its Own 'Buy Now, Pay Later' Service

What happened

Apple has launched its own "buy now, pay later," or BNPL service called Apple Pay Later. Customers who use it can pay for purchases using loans ranging from $50 to $1,000 over a period of six weeks, with the first payment due upfront at the time of purchase. Select U.S. Apple users will be eligible for Apple Pay Later now, and the service will be continuously rolled out to more users over the next several months.

So what

BNPL plan usage has grown a lot over the past number of years. Recent Ascent research found that 50% of consumers have used one of these plans, and they're most popular with younger consumers aged 18 to 44.

“There’s no one-size-fits-all approach when it comes to how people manage their finances,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet. “Many people are looking for flexible payment options, which is why we’re excited to provide our users with Apple Pay Later.”

Now what

The option to pay for purchases in installments over time can be a convenient one for consumers. And one big perk of BNPL plans like Apple Pay Later is that sticking to a repayment plan means avoiding interest in the course of spreading out payments. By contrast, carrying a credit card balance for even a short period of time will generally mean facing interest charges (the exception being a 0% introductory APR card).

But programs like Apple Pay Later also have their drawbacks. For one thing, they tend to lure consumers into the trap of thinking they can afford a given purchase when, in fact, they can't.

Because BNPL plan users aren't parting with a larger sum of money upfront, a given purchase might seem affordable. But when those additional payments start coming due, that's when consumers tend to run into trouble.

And falling behind on a BNPL plan could have serious consequences. Not only can it result in interest and penalties, but late payments are commonly reported to the credit bureaus. That could result in credit score damage, the same way a late credit card payment might. In fact, the Ascent found that 33% of BNPL users have made a late payment or incurred a late fee on one of these plans.

As such, consumers who are excited to use Apple Pay Later should do so with caution and follow a general rule: If the item in question can't be paid for in full on the spot, then it's an item worth passing on unless it's an emergency purchase.