Canadians are feeling the pinch from the climbing cost of living, with rising numbers of individuals turning to ‘purchase now, pay later’ approaches to their spending.
Consultants warn that whereas it will possibly assist ease the up-front strain, it may be a dangerous tactic in the long term.
“I’ve observed that it’s on each single retail web site, and if one shouldn’t be disciplined, I can see the way it’s really easy for folks to comply with buy now, pay later as a result of the funds look so low,” mentioned Stacy Yanchuk Oleksy, CEO of the Edmonton-based non-profit credit score counselling company Cash Issues.
“If one is struggling financially they usually’re instructed that in the event that they paid $5 or $10 a month, it’s a very easy hook for folks to make that buy. Nonetheless, my concern with these purchase now, pay later apps is that folks lose monitor of what they’ve dedicated to.”
‘Purchase now, pay later’ provides usually are not new — successfully, it’s a mortgage or a credit score line usually used for a big buy.
“Our mortgages are the unique ‘purchase now, pay later,’ and it looks as if firms have discovered a option to capitalize on that idea,” mentioned Kelly Ho, a Vancouver-based licensed monetary planner.
‘Purchase now, play later’ provides have elevated quickly throughout the years for the reason that pandemic.
In line with analysis from Morgan Stanley, ‘purchase now, pay later’ loans financed two per cent of all e-commerce gross sales in 2020.
By 2024, that was as much as six per cent.
Canadians are coming to depend on it an increasing number of, too.
By the top of this 12 months, the ‘purchase now, pay later’ market in Canada is predicted to develop 12 per cent yearly to US$7.5 billion, a report by market analysis service R&M mentioned.
Usually, shoppers would possibly ‘purchase now, pay later’ for large purchases like TVs, laptops and different costly electronics.
However analysis suggests Canadians are dipping into these companies for small purchases resembling takeout.
Get breaking Nationwide information
For information impacting Canada and around the globe, join breaking information alerts delivered on to you once they occur.
Canadian fintech agency Koho, which provides ‘purchase now, pay later’ companies, mentioned the share of eligible customers utilizing that choice has risen from 38 per cent to 44 per cent within the final six months.
The highest classes for which Canadians used ‘purchase now, pay later’ at Koho had been groceries, telecom and eating places. Based mostly on a pattern dimension of 10,000 customers, the common transaction was $187, and the common mortgage quantity was $345.
Whereas ‘purchase now, pay later’ companies can break up an enormous fee and make it easier to get via a tough patch, making it a behavior could lead on you right into a debt lure, Oleksy mentioned.
“Credit score is neither good nor unhealthy. It’s only a device. A very good butter knife spreads good butter in your bread, however you drop it in your foot and it will possibly stab you within the foot,” mentioned Oleksy.
And whereas the lure for financially burdened Canadians will be sturdy, the funds can simply add as much as monetary ache down the highway, mentioned Ho.
“You probably have 15 or 20 of these ‘purchase now and pay later’ for the 15 or 20 objects that you just bought off of various web sites … regardless of how organized you might be, until you might have a really meticulous spreadsheet detailing each single fee, we have now an issue,” Ho mentioned.
And in the event you miss a fee? “That’s the place they get you,” Oleksy mentioned.
“Should you use it completely, it’s an honest device each occasionally. It’s if you miss a fee — that’s the place, increase, the curiosity tacks on,” she added.
For some customers, ‘purchase now, pay later’ loans could possibly be a option to keep away from even riskier bank card debt.
“In a means, if one is disciplined, ‘purchase now pay later’ might assist folks mitigate these 20 per cent bank card rates of interest,” Ho mentioned.
In line with an Equifax report launched Monday, 1.4 million Canadians missed bank card funds in April, Could and June of 2025. Whereas that’s 7,000 fewer than final quarter, it’s 118,000 greater than in the identical interval final 12 months.
“’Purchase now, pay later,’ if it’s used very, very strictly, isn’t a foul product. It permits somebody to interrupt up a fee into equal funds. It’d enable somebody to delay a fee and even get (one thing on) zero per cent curiosity,” Oleksy mentioned.
Maintaining the ‘purchase now, pay later’ choice just for greater purchases can assist mitigate the dangers, she added.
“Most of us don’t have $1,500 or $2,000 to only drop on a laptop computer. So possibly you break it up into 4 funds and that simply makes it simpler. And you continue to get what you want for work, faculty or life. It’s simply when it turns into a behavior, if you’re counting on it for the small day-to-day purchases, that’s the place I begin to fear,” she added.
With the brand new faculty time period beginning in a number of weeks, dad and mom and college students throughout the nation will probably be heading to shops for back-to-school procuring. Planning forward of time, as a substitute of dipping into ‘purchase now, pay later’ loans, can assist relieve the monetary stress that comes with repayments.
“We all know that back-to-school is an annual occasion when you might have school-age youngsters. So it’s not a shock that this occasion is arising. And like with the rest, planning prematurely is vital,” Ho mentioned, urging dad and mom to start out squirrelling away cash forward of time to spend in August or September.
Shopping for some faculty provides second-hand or used is also a fantastic choice, she added.
“Don’t spend cash that you just don’t have,” Ho mentioned.
