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  • Subhan Tariq, Esq

‘BUY NOW, PAY LATER’ May Distort Your Credit Score


‘Buy Now, Pay Later’(BNPL) is a kind of deferred payment option that typically enables you to buy goods with little to no money put up a front and then pay for them over time in installments. If you shop online, you are likely to be familiar with the BNPL service. However, before choosing any service, it is critical to comprehend the advantages and risks associated with it.

For many customers, BNPL can be a tempting payment option because it makes it simple to buy something today and pay for it tomorrow. But the truth is, they trick you into debt. Although it may seem convenient, it can do more harm than good. Though a quick way to purchase an item you might not have purchased if you had to pay full price, it does not allow you enough time to think about whether you can afford the payment or not. BNPL encourages impulsive buying.


It can often result in using too much of your available credit. Making late payments can also hurt your credit score. Currently, the majority of BNPL companies do not submit reports to credit reporting agencies. Your credit history could be harmed if you make a late payment, and the BNPL company will then inform the credit reporting agency about it. Before utilizing a BNPL company's service, ensure that you check whether or not they provide reports to the credit bureau.

Generally, BNPL companies do not pull hard inquiries when you apply for their services. You can instantly get approval; it's that simple and convenient. However, before selecting this option, you should consider a few things;

Late Fees for BNPL Services


Most of the BNPL companies don’t charge interest; however, if you miss a payment, you will be charged a late fee. These late fees could be as little as $7 or as much as $25 of your original order value, according to research by the Motley Fool.


If you cease making payments entirely, the BNPL service may also send your debt to collections or prohibit you from making further payments. To find out which costs you should be cautious of, you must read the individual terms and conditions for the BNPL services you intend to use, as each company has different policies and corresponding fees.

BNPL Damaging to Credit


BNPL services don’t report on-time payments to credit agencies therefore, it doesn’t boost your credit in any way. However, there are some BNPL companies that report missed payments to credit agencies if you cease to pay, which could hurt your credit score. They don't improve your score in any manner, so to speak, but if you're not careful, they might actually hurt it.

BNPL and Credit Cards are Not the Same


The BNPL service is similar to credit card services in that you make a purchase and pay later over time. However, BNPL lacks the consumer protection that credit cards have to offer. In the event that the product you purchase is defective or a scam, BNPL companies do not provide the same dispute protections as credit cards. Returning goods purchased via BNPL can oftentimes be challenging. BNPL companies may continue to charge you for the full amount of the purchase even after you've returned the item, in that case, make sure you read and comprehend the merchant's unique return policies.

Over the past few years, BNPL services have boomed at a rapid rate and are now present at nearly every virtual checkout. However, just because you can quickly meet the requirements for a BNPL service doesn't mean you should. Before you spend, do not forget to assess whether you can afford the products you wish to buy. If you do decide to proceed, be sure to make your payments on time to avoid accruing late fees and damaging your credit score.

For more information, contact us at info@tariqlaw.com.


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