Borrowing
Buy now, pay later is credit, and it is starting to show
Deferred payment products sit outside older consumer credit rules in many places, and that is changing.
What follows is an argument about buy now pay later, and about where the received version of it stops being true.
The argument in brief
- Missed payments can be reported and can affect a credit file.
- Multiple concurrent plans are easy to accumulate and hard to track.
- Regulation is tightening in several jurisdictions.
It is borrowing, whatever the checkout calls it
Splitting a payment over instalments is credit, even when it is interest free and presented as a payment option. The absence of interest does not remove the obligation, the late fees or the consequences of default. Framing at the point of sale deliberately reduces the sense that a borrowing decision is being made.
The accumulation problem
Individual plans are small, which makes each decision feel trivial and makes the total easy to lose track of. Several concurrent plans across different providers produce a monthly commitment nobody planned. Listing every active plan in one place is usually a sobering and useful exercise.
Reporting is increasing
Providers increasingly report to credit reference agencies, so both good and poor repayment can appear on a file. Missed payments and referrals to collections can affect future lending decisions.
The assumption that these products are invisible to lenders is becoming outdated.
Affordability checks are often light
Approval is frequently instant with minimal assessment, which is convenient and is also the mechanism by which people over-commit. Regulators in several jurisdictions have moved to bring these products under consumer credit rules requiring proper checks. Where that has happened, approval has become slower and the protections stronger.
If that does not fit your week, it is not a failure of willpower.
Consumer protections differ
Rights around faulty goods, refunds and chargebacks can be weaker than with a credit card in some jurisdictions. Returning an item does not always cancel the payment plan automatically. For expensive purchases, the additional protection of a card can be worth more than the deferral.
The takeaway
List every active plan in one place. The total is usually larger than the impression.
Pick the one that costs you least, and let the rest wait.
Questions readers ask
Does using BNPL affect my mortgage application?
It can. Providers increasingly report, and lenders reviewing bank statements will see the payments as commitments regardless.
What happens if I miss a payment?
Late fees are common, and the debt may be referred to collections and reported. Contact the provider before missing rather than after.
Also by Marcus Achterberg
- How credit card interest is actually calculatedCredit Cards
