Buy Now Pay Later in Canada

The last year was brutal on the spending budgets. Almost all Canadians felt the pinch of inflation with more spent in just about every area of the budget. As such, most Canadians looked for creative ways to cut costs or reduce overall spending — and, in some cases, Canadian shoppers began to take advantage of Buy Now Pay Later (BNPL) installment plans.

What is Buy Now Pay Later?

Buy Now Pay Later (BNPL) is a type of short-term financing that allows people to buy items and pay for them over time. Some BNPL comes with no interest, while other BNPL plans come with a lower interest rate than with other short-term loan options.

6 key statistics on Buy Now Pay Later in Canada

• 6% of e-commerce transactions in Canada are through BNPL plans, compared to 2% of point-of-sale transactions, in 2022⁽¹⁾
• It’s estimated that 7 out of 10 e-commerce vendors in Canada will offer BNPL on their website by 2024⁽²⁾
• 34% of Canadians are familiar with BNPL services⁽³⁾
• 8% of Canadians used at least one BNPL service between September 2019 and March 2021⁽⁴⁾
• BNPL in Canada will grow 55% annually, increasing in value from $3.2 billion in 2020 to more than $22.6 billion by 2028⁽⁵⁾
• 74% of people surveyed by the Financial Consumer Agency of Canada said they wouldn’t consider using BNPL⁽⁶⁾

Adoption of Buy Now Pay Later in Canada depends on gender and age

It’s estimated that in 2023, BNPL transactions in Canada will make up an estimated 7% of the value of all North American BNPL transactions.⁽⁷⁾ The growth of Buy Now Pay Later in Canada is due, in part, to the adoption of these payment plans by younger generations. For instance, Gen Z and millennials — Canadians between the ages of 18 to 34 — are statistically more likely to use Buy Now Pay Later than older Canadians (those 55 and older).⁽⁸⁾ However, 3 out of 10 Canadians, who have not used BNPL, indicate that they are likely to start using a BNPL service in the near future.⁽⁹⁾

In general, men are only slightly more likely to use a BNPL plan (24.4%) than women (22.2%).⁽¹⁰⁾ The three most common reasons⁽¹¹⁾ Canadians use Buy Now Pay Later is to:

1. “help me budget” — 42%
2. “couldn’t afford the entire purchase right away” — 39%
3. “avoid interest and fees”— 23%

BNPL mistakes

Unfortunately, not all BNPL purchases are positive. Finder surveyed almost 33,000 internet users in 23 countries about the use of BNPL and their potential remorse after using these payment plans. Turns out Canadian shoppers rank 19th (out of 23) for BNPL remorse, with 11% of Canadians admitting that they made a Buy Now Pay Later mistake.⁽¹²⁾ While this is below the global average — 17% of shoppers confessed to a BNPL mistake — it is above the 10% of German shoppers and 9% of US shoppers who regret using BNPL.

The five most common BNPL mistakes⁽¹³⁾ by Canadian shoppers are:

1. to make an impulse purchase — 5.2%
2. getting stuck with late fees — 4.5%
3. overextending the budget — 3.1%
4. opting for a more expensive option — 2.0%
5. paid bank fees after bank account went into overdraft due to BNPL payment — 1.6%

Most common BNPL mistakes in Canada, by age group and gender

On average, 11% of Canadians admit to making a BNPL mistake. While younger generations may be more open to using Buy Now Pay Later, older Canadians are more likely to make a BNPL mistake. To appreciate how age or gender factors into BNPL mistakes, Finder surveyed almost 33,000 BNPL shoppers. Survey data shows that of the shoppers that have used Buy Now Pay Later, the biggest BNPL mistakes, by gender, were:

Most common BNPL mistake by age group in Canada

• 18-24: Paid a late fee (3.0%)
• 25-34: Made an impulse purchase (5.4%)
• 35-44: Paid a late fee (8.1%)
• 45-54: Paid a late fee (5.0%)
• 55-64: Made an impulse purchase (7.2%)
• 65+: Made an impulse purchase (6.1%)

How do you sign up for Buy Now Pay Later plans?

In most situations, a customer is offered a Buy Now Pay Later plan either through their credit card or at a point-of-sale terminal, at the store. In some circumstances, a customer can set up a BNPL account online before making a purchase. In most cases, the customer must be age of majority in their province and already approved to use a credit card or store account card.

In some cases, the Buy Now Pay Later plans will not require a credit check — as this check was already performed when you applied for and opened your credit or store account card. However, some BNPL providers will run a credit check. If this is a concern, check before applying for the BNPL plan.

How much does Buy Now Pay Later cost?

Most BNPL plans don’t cost anything when you sign up and are free to use if you make payments on time over a short period of time (i.e. within two months). Some Buy Now Play Later plans will charge a small monthly fee — between $4 to $8 — while other plans will charge a percentage of the total purchase cost, say 1% to 3%.

Most BNPL plans will charge a late payment fee if your payment is not made on time. Late fees typically cost between $4.99 and $20 for the first missed payment, and climb higher if you miss more than one payment.

How do BNPL providers make money?

Buy Now Pay Later providers usually make most of their money by charging fees to the business that offers their payment plans. For instance, Afterpay will charge retailers a transaction fee, plus a commission that ranges from 4% to 6% per transaction.

Where can you use Buy Now Pay Later in Canada?

You can only use Buy Now Pay Later plans with retailers that offer this option or with credit or store account cards that offer these payment plans. Over the last few years, more retailers have opted to provide BNPL to their customers. At the same time, more credit cards are adopting BNPL plans for their cardholders. For instance, Rogers Mastercard offers 0% interest Buy Now Pay Later installment plans for any purchase over $250 and only to cardholders in good-standing. Canadian Tire Mastercard holders have the option of using the retailers BNPL no-fee, no-interest plan for any purchase made at participating retailers and above $150.

How much can you spend using Buy Now Pay Later in Canada?

The maximum you can spend using Buy Now Pay Later plans varies significantly from each retailer and card provider.

For BNPL companies, the maximum you can spend is often predetermined when you open and apply for an account.

How do BNPL repayments work?

Buy Now Pay Later plans typically offer installment repayments, where you pay the same amount over a few weeks or months. For example, a $200 purchase could be broken down into four monthly payments of $50, each.

To take advantage of Buy Now Pay Later plans, customers need to be clear on how fees and charges are applied — and take advantage of interest-free or low-fee promo periods. For instance, some Buy Now Pay Later services offer an interest-free period, before fees and charges apply. For example, a customer could sign up for a BNPL that offers 60 days of no interest. In this case, the customer should try and pay as much of the BNPL amount, before interest starts to accrue.

In almost all cases, if a customer makes all their BNPL fees payments on time, they’ll avoid late payment fees and additional interest costs.

Example: Paying off a purchase with BNPL provider Afterpay

For instance, if you used Afterpay to purchase a TV for $1,000, you could pay for this purchase in four payments of $250 each. You could schedule these payments to Afterpay, using your credit card or have the withdrawal come directly out of your bank account. During the course of these repayments, if a payment was declined, you would be charged a late fee of $10, plus another $7 if that missed payment wasn’t made within the next seven days.

Does Buy Now Pay Later in Canada help with your credit score?

It’s worth noting that most Buy Now Pay Later plans do not help your credit history or your credit score since these payments are not recorded in your credit history. However, the debt is recorded which means BNPL can add to your overall credit utilization — the amount of credit you use — and this could hurt your credit score.

Bottom line

Buy Now Pay Later in Canada is becoming an increasingly popular option. While BNPL offers an easy and convenient way to pay for larger purchases, it does come with risks. To avoid these risks, customers need to consider how BNPL will help, or hurt, their current ability to pay their bills and their future need to borrow funds.