Risks of Buy Now, Pay Later Programs

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But there are financial risks to choosing a BNPL plan, especially if you miss a payment.

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According to a recent study by Credit Karma, 34 percent of consumers who used BNPL services fell behind on one or more payments. Of those, younger shoppers were far more likely to fall behind, with more than half of Gen Zers and millennials reporting they missed a payment vs. 22 percent of Gen Xers and just 10 percent of baby boomers.

Late payments can result in fees or even put you on debt collection lists depending on the terms of the BNPL provider. The Credit Karma survey found that 72 percent of those who missed a payment said they thought their credit score dropped as a result. One out of three in that group said their credit score declined significantly.

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Those penalties may come as a surprise to some consumers, who may lose track of their payments or use more than one BNPL plan. The terms of the providers often differ, with some charging late fees or reporting to credit bureaus, while others don’t.

“Consumers don’t always understand how these loan programs work or what help they can expect if something goes wrong,” says Chuck Bell, a financial policy advocate with Consumer Reports.

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Those concerns recently prompted the Consumer Financial Protection Bureau to open an inquiry into the business practices of five leading buy now, pay later providers. The inquiry requires the companies to provide information about the debts being accumulated by consumers, the dispute-resolution protections available, and the use of consumer data.

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So before you opt for a buy now, pay later plan, carefully consider these guidelines.



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