Some of the country’s largest retailers are resurrecting a modern take on a long-standing payment option similar to layaway or pay-to-pay – buy now, pay later.

With more than 11 million people still unemployed due to the pandemic, Neiman Marcus, Saks Fifth Avenue, Sephora, Target and Amazon are among hundreds of retailers offering shoppers a way to analyze interest-free payments debited from. an on-time bank account for Christmas gifts instead of forcing consumers to pay with high-interest credit cards.

“Generation Y and Generation Z saw their parents go through immense hardships [during the financial crisis] where the American consumer was in debt, ”Rafe Petkovic, chief revenue officer at Columbus, Ohio-based payment solutions company Klarna, told NBC News. “Consumers today are certainly waking up, and it has been a significant acceleration in the market opportunity here today. “

Already, consumers have used their money differently from the generation that survived the Great Recession. In the first three months of 2020, consumers improved their average credit scores and decreased defaults on all debt, according to to a September analysis by the credit reporting agency Experian. However, in 2008, at the onset of the recession, consumer debt soared 4%, credit scores only increased by two points, and defaults were reduced at a slower rate than borrowers were. ‘today.

“Although the first three months of consumer debt and credit data from the current recession paint a positive picture of consumer finances, unemployment reached all-time highs in 2020,” the bureau reported. “As incomes decline and stimulus aid continues to run out, consumer finances can change as people seek ways to cover their expenses. “

Before the pandemic, young digital natives were already rapidly adopting “point-of-sale” loans from companies such as Affirm, Afterpay, Klarna and Quadpay. But during the pandemic-induced recession, those payment options have skyrocketed with the increase in e-commerce and the willingness of retailers to work with customers, Adam Pressman, chief executive of AlixPartners, told NBC News. .

Consumer downloads of Klarna are up more than 106% from last year, Petkovic said. In the first month of the pandemic, Affirm saw a 163% increase in home fitness sales and home office sales increased 200%. Over the Black Friday weekend, Afterpay said it saw an 186% increase in sales, while Klarna said it processed five times as many transactions over the weekend as it did in the first four years of business. combined operation.

“We believe this is just the start of further disruption to come,” Petkovic told NBC News.

Loans work like this: retailers pay a transaction fee on each sale, and buyers pay their balance over time with their debit account. Affirm, which charges interest rates between 10 and 30 percent, reports to a credit bureau. But Klarna, Quadpay, and Afterpay don’t. Each company charges late payment fees ranging from $ 35 per missed monthly payment with Klarna to a late fee of $ 7 with Quadpay. Affirm does not charge late fees.

“I think it will be as ubiquitous as free shipping,” Quadpay co-CEO Brad Lindenberg told NBC News. “Each site, I think within a few years, will have the possibility of paying in installments. “

The financial services industry has certainly taken note of this. The booming buy-it-now and late-pay industry may soon overtake traditional credit cards if merchants jump in, Ted Rossman, industry analyst at CreditCards.com, told NBC News in an e- mail.

Retailers make less money on a purchase with a point-of-sale loan, but with the scale, they can avoid credit card fees and use those partnerships for marketing or customer data, he said. declared.

“Young adults love debit cards, and debit has worked well during the pandemic,” Rossman said. “Buying now, paying later could be a hybrid of debit and credit, at least for some consumers.”

But these payment methods also come with pitfalls consumers should be aware of, Kimberly Palmer, personal finance expert at Nerdwallet, told NBC News in an email. While it is tempting to pay for a purchase with one of these loans, “it can lead to higher costs over time.” Interest or charges can go up to 30%, she added.

“If you really need to buy something and you don’t have access to a credit card or introductory 0% APR savings, then using a purchase loan (also called point-of-sale loan) is a viable option, ”she said.

As with any loan, debt is debt, according to Gannesh Bharadhwaj, general manager of credit cards at Credit Karma. It’s important to read the fine print, stay on budget and make payments on time, he told NBC News.

Justin Childs, admissions coordinator at Florida International University in Miami, told NBC News he uses Afterpay, Affirm, and Quadpay for almost all of his purchases, even if he has credit cards. Over the Black Friday weekend, he used the apps to shop at Best Buy, Banana Republic, and to purchase toys for his niece and nephew. He was never late on a payment.

“My parents aren’t budget people, so being on my own I know I have to take care of these things,” he said. “It allows shopaholics to roam freely – but also to be aware of the budget items I have to take into account.”