Capital One Takes On Buy Now, Pay Later Financing

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Last updated on April 5th, 2023

Capital One is reportedly no longer allowing “transactions identified as point-of-sale loans charged on its credit cards, regardless of the point-of-sale lender.” The bank – the third-largest issuer of credit cards in the United States – says the move is a step to distance itself from Buy Now, Pay Later (BNPL) financing structures.

Capital One Blocking Buy Now, Pay Later Transactions

BNPL is a popular form of alternative financing that is quickly gaining prominence. These services work as a type of credit where a customer can offset the initial cost for several months – or even years.

When a person opts for a BNPL option and applies, a financing company will pay the consumer’s purchase cost. These companies sometimes require a percentage of the purchase to be paid upfront, while others may finance the entire charge.

Capital One is the first major credit card issuer to take a stand against BNPL services, however. The bank is seeking to stop people from using their Capital One credit card to pay off these debts, citing the risk to customers’ financial well-being as the primary reason.

The Dangers of By Now, Pay Later Services

While BNPL services are experiencing significant growth, there are worries about consumers’ risk from these types of loans. “These kinds of transactions can be risky for customers and the banks that serve them,” a Capital One spokesperson said in an email to the Financial Post.

The allure of BNPL financing is the 0% introductory APR they provide. Once these initial periods end, however, the interest rates rise considerably. Many services charge an APR of around 30%, which is significantly higher than most credit cards. The result is a danger for consumers falling deep into debt – especially if they cannot pay off balances in time.

About Capital One

Capital One is a leading bank and credit card issuer, with over 62 million credit cards currently in circulation. Capital One is a unique issuer in that it offers credit card products to fit nearly every credit profile.

Related Article: Buy Now, Pay Later: Is It Worth It?

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About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

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