Consumers enjoy the convenience of “buy now pay later,” but they are unaware of how it affects their wallets.

“People love the convenience, but there is still a lot of misunderstanding regarding BNPL services and their influence on people’s financial lives.”, says Amy Maliga, a financial educator with Take Charge America. It’s simple to overlook the future threats because there is such confusion. Because of this, it’s essential to look more closely at any new services or products, especially those that make it simpler for you to spend your hard-earned money.  Prior to utilizing BNPL services, Maliga advises you keep the following in mind:

Don’t be misled, these “loans” function as credit

BNPL payments are a form of credit, despite the fact that BNPL providers may advertise themselves as a more convenient way to pay for regular purchases without using credit or debt. Additionally, some services impose late fees or interest if you miss a payment. Use caution when utilizing these services as it is simple to slip into debt.

Most likely, you’ll spend more.

Retailers aggressively market BNPL since customers tend to spend more money when using these services. Two-thirds of buyers who used BNPL plans spent more than they otherwise would have, according to a LendingTree poll. Be sure to examine your finances and bank account before making that expensive purchase. Make sure you can actually afford it. Otherwise, you run the danger of racking up debt you cannot pay for.

Inconsistent impact on credit scores.

You don’t benefit from the advantages of responsible repayment because the majority of BNPL suppliers don’t report on-time payment information to the major credit agencies. Negative incidents, such as late payments or collection activities, are more likely to be recorded. Due of this, it is even more important that you make all of your BNPL payments on time and without missing any.

No consumer safeguards.

These services are not covered by the Truth in Lending Act because of BNPL’s typical four-installment payment schedules. This mean that with BNPL providers, consumers are not protected from any potential predatory or misleading lending practices. What is the difference?  Federal law requires five installments before any regulations are imposed.

Source: inbusinessPHX.com (intended for educational purposes only)

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