After months of speculation, Apple finally unveiled its buy now, pay later offering this week, wading into an industry that’s experienced explosive growth. But consumers should be wary of jumping into the service and first consider some of the potential pitfalls, observers say.

Buy now, pay later — also known as “BNPL” — startups offer a simple product (at least on the surface): A consumer who uses the product to make a purchase can divide the cost into four smaller installments, which are mostly interest-free, made over a few weeks.

Already a red-hot product, BNPL is likely to see a powerful surge in interest with the entry of a tech behemoth like Apple, analysts say. Apple’s BNPL product is powered by the Mastercard network, and it is slated to be available wherever Apple Pay is a payment option. Payments can be managed on the iPhone itself via Apple Wallet.

See:

• Why BNPL Swedish giant Klarna has sights set on Canada

• Financial Consumer Agency of Canada publishes BNPL pilot study

Here are four reasons shoppers may want to tread carefully before signing up for a BNPL program, according to experts.

1. Interest-free installments do not mean a buy-now-pay-later purchase is cheaper. In splitting a payment into four and making an expensive item “cheaper” and more manageable by paying in installments, there’s a potential danger of overspending.
2. Buying now and paying later for essential goods could be a sign of financial distress.  There’s also a potential for deferring payments unnecessarily, particularly for essential goods, which could become a Band-Aid that masks deeper financial problems.
3. BNPL could potentially affect your credit score in the future.  Late fees are not substantial, as of now. But with credit bureaus looking at BNPL and thinking of how to account for them in users’ credit scores, there is a potential for some damage to occur to your credit score in the near future.
4. The good times may not last forever if BNPL companies changing tack, because offering zero-cost installment loans amid an inflationary backdrop could become costly — and, therefore, destined to be short-lived.

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