The Risks of Buy Now, Pay Later Services

High Fees and Credit Score Harm Reasons for Caution

Andy Spears
3 min readNov 5, 2021


Consumers enjoying the convenience of buy now, pay later (BNPL) products such as AfterPay and Klarna should be aware of potential risks, consumer advocates warn. While these services can be helpful, they can also hurt a consumer’s credit score and sometimes carry high fees.

Lauren Saunders of the National Consumer Law Center (NCLC) says of these products:

Buy-now-pay-later products, if affordable and truly free to the consumer, may help consumers manage larger purchases without the long-term debt and high costs of credit cards. But some BNPL products may have deceptive and abusive profit models built on the expectation of late fees from struggling consumers.

Saunders warns that some BNPL products focus on consumers who are not likely to be able to repay the debts on time. These consumers then incur significant late fees that boost the revenue earned by the service provider.

BNPL providers do not directly consider the consumer’s ability to repay. Even if they check do a soft check of credit reports, those reports may not reveal BNPL debt. Industry analysts have warned that BNPL providers may underestimate consumers’ debt levels and may be headed for even higher default rates.

In addition to a potential debt trap, BNPL products can actually harm a consumer’s credit score.

Trina Paul, writing for CNBC, notes the ways these products may negatively impact a consumer’s credit score.

“If reported, a missed payment can be noted on your credit report for up to seven years and will negatively impact your credit score,” says Rod Griffin, the senior director consumer education and advocacy at Experian.

Additionally, having multiple short-term accounts can make it look like you have more debt than you can handle — decreasing your credit score.

“While the record of on-time payments can boost your credit, you could see a blow to your score from using the [BNPL] service,” says Leslie Tayne, founder and managing director at Tayne Law Group. “Every purchase you make with a POS loan is considered a separate account on your credit report that gets closed once you pay off the balance. Since these loans are short-term (generally six weeks), they can bring down the average age of your credit history considerably — especially if…



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .