Just because Buy Now, Pay Later services provide a streamlined lending and repayment process doesn’t mean millions of Americans aren’t falling behind on their BNPL payments. A new report highlights that over a third of BNPL customers are missing payments, with financial experts warning that the allure of BNPL doesn’t mean the service is without hidden dangers for consumers.
Report: 36% of Consumers Have Missed a Buy Now, Pay Later Payment
Buy Now, Pay Later (BNPL) services are quickly becoming the go-to way for budget-conscious shoppers to finance purchases. According to a study of 1,500 U.S. consumers by Breeze, roughly three-quarters of respondents state they have used a BNPL service in the past, with millennials most likely to opt for BNPL versus older generations.
BNPL services are quickly replacing layaway as the preferred financing method for stores. Shops receive their payment in full while consumers set up a payment plan and get the product without having to wait – a win-win for all involved – or so it seems.
While BNPL services are experiencing significant growth, there are worries about consumers’ risk of these loans. “It is sexy to think you can get something that you can’t afford,” Mark La Spisa, a certified financial planner and president of Vermillion Financial, told Acorns in an interview. “That’s the illusion that is going on.”
Breeze’s survey found that 36% of respondents had either missed a BNPL payment or were late meeting their financial obligations – both causing negative impacts to individual credit scores and maing obtaining other loan products in the future more challenging.
Be Wary of BNPL Fees
The biggest BNPL danger IS the ease of access the service offers. Consumers with limited credit history – and even damaged credit scores – enjoy greater access to financing through BNPL than via credit cards, personal loans, and other financial products. Despite this ease of access, however, many consumers might be unprepared for the associated costs of these BNPL loans.
McGrath suggests researching the fees and interest charges associated with a BNPL service, like Affirm, Klarna, AfterPay, or others, before agreeing to the terms and making a purchase. Some BNPL services do not charge interest, instead of focusing on late payments – with late fees running as high as 25% of the purchase price with Affirm.
“To use these programs safely, shoppers might consider putting a planned, budgeted-for, big-ticket purchase on a ‘Buy Now, Pay Later’ plan to give themselves some breathing room,” McGrath says. “But putting a slew of impulse buys on these plans throughout the season can get dangerous.”
Related Article: Visa Launches Visa Installment BNPL Service
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