Buy Now, Regret Later

 

In recent years, “Buy Now, Pay Later” (BNPL) services have surged in popularity, offering consumers a seemingly easy way to spread out payments for everything from clothing and electronics to furniture and travel. Promising interest-free installments and instant approval, companies like Afterpay, Klarna, and Affirm have reshaped how people shop. At first glance, splitting payments into smaller, interest-free chunks feels like a no-brainer. But as tempting as these options look, hidden terms and fees are catching consumers off guard.

On the surface, BNPL is simple: you buy now, and you pay later. No interest, no fuss, maybe just a small service fee for initiating the loan. But once you start using it, those “easy” payments can pile up fast. Small payments on a few purchases can add up quickly, leading consumers to spend more than they might otherwise, and one missed payment can lead to late fees—or worse.

Unlike credit cards, BNPL services are not subject to the same regulations as traditional lenders or credit card companies. For example, BNPL providers mostly operate outside of regulations requiring prominent disclosures of terms and interest rates. And not checking credit scores means some BNPL lenders might extend credit beyond a buyer’s means, setting consumers up for failure. When late payments do happen, some providers report these late payments to credit bureaus, which can damage credit scores, while others do not, leaving consumers in the dark about how their financial choices today will impact them long-term. The lack of transparency in the BNPL industry is dangerous for consumers and for the economy.

Generation Z is getting hit the hardest with BNPL pitfalls. Studies show that BNPL services disproportionately affect younger consumers and those with lower incomes, since the frictionless payment process often masks the reality that these purchases are still a form of debt, and repayment isn’t always as manageable as it appears.

To navigate the risks, consumers should approach BNPL with caution. Policymakers are beginning to push for stricter regulations to protect consumers from falling into debt spirals. These efforts should help increase transparency in the BNPL industry. And reading the fine print, setting spending limits, and budgeting for future payments can help consumers avoid falling into the BNPL snares. In the meantime, keep a close eye on any offers of “small, easy payments”—they could turn into a big headache.

 

Originally published at faruqilaw.com