Risks to "Buy Now, Pay Later” (BNPL) Services
“Buy Now, Pay Later” (BNPL) services have gained a lot of popularity in recent years. According to Adobe Analytics, BNPL usage hit an all-time high this past Cyber Monday. BNPL’s provide consumers with options to make large ticket purchases while paying for them in installments within an agreed upon time frame. Most services provide four payments within a six-week period while other agreements can be for longer periods. Although convenient for some users, it also comes with potential dangers and risks.
1. Debt Accumulation: BNPL’s can encourage overspending, which leads to the accumulation of debt because consumers are tempted to make purchases they cannot afford.
2. High Fees and Interest Rates: BNPL service providers like Affirm, charge interest rates ranging from 0-36% when making payments over 3-60 months. Late payment fees can add up if you miss payments. BNPL service provider Afterpay charges $7-10 for late payments or missed payments outside of the stated grace period.
3. Encourage Impulsive Buying: BNPL services encourage impulsive spending by creating the ease of making purchases without an immediate full payment which can lead to bad habits that contribute to financial instability over time.
4. Creating Confusion for Consumers: Consumers can be caught off guard with different terms as BNPL’s are not regulated by the Truth in Lending Act.
For more information on “Buy Now, Pay Later” please visit:
New Buy Now, Pay Later Loans Come With More Risks - Consumer Reports
