What Makes Buy Now, Pay Later so Risky?

Consumer advocates urge caution when presented with “easy credit”

Andy Spears
3 min readApr 5, 2022

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Photo by Harry Cunningham on Unsplash

As Buy Now, Pay Later (BNPL) products such as AfterPay, Klarna, PayPal (pay in 4), Affirm, and others saturate the market with easy credit, consumer advocates continue to warn about the dangers of these products.

The key concern is a lack of regulation. While BNPL can act like a credit card in some ways, it’s really a short-term installment loan. The products tend to offer “no fee” credit IF a consumer pays the full price for an item or service in four installments. So, a consumer will pay 25% of the price of the item up front and then make three additional payments (usually over about 2 months) to complete the purchase.

The consumer leaves the store (or completes the online purchase) while only paying a fraction of the total cost. This makes items that might seem unaffordable become accessible.

The consumer protection attorneys at Finn Law Group note the products carry certain risks:

Buy Now, Pay Later credit schemes are becoming increasingly popular. Now more than ever, companies are offering instant credit approval for discretionary purchases like recreation, entertainment and vacations including timeshare and travel clubs. However, these forms of credit can be risky for consumers who may not be aware of the hidden costs, terms, and risks associated with them. Many of these purchases are on impulse and are not planned, so people may not be thinking about the long-term consequences of taking on this type of debt.

Credit schemes like Buy Now Pay Later can be very tempting for consumers. After all, who wouldn’t want to purchase that new TV or vacation now and worry about the payment later? However, these schemes often are loaded with hidden charges and fees, which can add up quickly. In other cases, the full balance of the purchase may need to be paid off in a very short amount of time, leaving consumers with little time to save up for the payment.

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Andy Spears

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