In September 2024, I wrote about the reasons we should be wary of the Buy Now Pay Later (BNPL) programs which are becoming so popular. Yes, they’re convenient, but they make impulse purchases too easy and can quickly add to your debt.
Now, showing that BNPL providers have penetrated all levels of the consumer economy, the fintech lender Klarna announced in March that it was partnering with the food delivery app DoorDash. So, now you can pay for takeout with installment loans, and customers will be also able to use the Klarna for many types of purchases, not just food deliveries. They can pay in full or in four installments, or even later on, at a time that works with their own paycheck schedules, the BNPL provider has said.
There was a lot of pushback on social media to the announcement, but it comes at a time when the use of BNPL programs is surging amongst millennials and Gen Z consumers, many of whom are now using these providers to pay for their daily essentials, not just for occasional splurges.
Of course, the larger problem is that these BNPL providers are often needed for soaring “routine or daily” expenses to begin with, but we shouldn’t forget that there are real disadvantages of using these programs. When you use regular credit cards for your purchases and make payments on them, you are building your credit, while when you make timely payments on a BNPL platform, your credit does not improve. And while many BNPL providers don’t directly report to credit bureaus, late or missed payments can still negatively impact your credit history if the debt is sent to collections, which can be reported and consequently – your credit takes a hit.
Also, BNPL providers do not charge you to use the service, but you are charged a fee if your payment is late or if you miss a payment – and these fees can really snowball, adding to your debt.
As if takeout food platforms were not enough, now loans may also be offered by BNPL apps. Earlier this year, both Klarna and Affirm announced that merchants who use JPMorgan Chase to handle payments would soon be offering installment loans at checkout. Affirm said consumers will have access to loans ranging from 30 days to 60 months
Just, NO. We really don’t need this. Not the temptation to go further into debt and give into impulse spending, nor do we need the pressure to repay these loans or the risk of defaulting on them and having our credit damaged.
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