Buy Now, Pay Later: Difference between revisions

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~~BNPL (~~Buy Now Pay Later) is a financing option ~~being offered by more companies~~ to ~~increase sales~~. ~~The practice partakes in an~~ interest-free ~~payment plan where the customer pays in installment payments because they cannot currently afford the item they currently wish~~ to ~~purchase in full~~.

'''Buy Now, Pay Later (BNPL)''' is a financing option for online purchases that allows consumers to pay for items in four installments. Companies such as [[Klarna]], [[Affirm]], [[PayPal]], and [[Apple Pay]] offer Buy Now, Pay Later loans at the check-out of online retailers, advertising four low payment installments. Because the lenders generally commit soft credit checks and offer interest-free installments within a short period, BNPL is highly targeted toward those who have bad or no credit at all. It disproportionately affects vulnerable consumers, leading to major criticisms of predatory lending.

==How it works==

When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely ~~payed~~ off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest if ~~your~~ unable to pay it), account fund freezes, or in worst case scenarios, be sent to a debt collector which can affect your credit score.

When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest if you're unable to pay it), account fund freezes, or in worst case scenarios, being sent to a debt collector which can affect your credit score.

==Why it is a problem==

~~Much like~~ credit ~~cards~~, ~~this provides consumers a false mindset in where they start to spend more than they actually have. This~~ is ~~due~~ to the ~~first initial part~~ of ~~the payment being a fraction of the total cost~~. ~~If the consumer is not keeping track of the payments due each month (since each item being purchased may~~ have ~~separate agreements~~ for ~~when you have~~ to ~~pay) can lead~~ to ~~a Pile On effect where the customer get billed a bunch~~ of ~~late fees~~ that ~~they owe interest on because they were not able~~ to ~~pay~~ the ~~agreed upon amount~~. This ~~can lead the consumer into financial ruin~~ because ~~they now owe~~ the ~~late fee (with interest if not payed immediately) plus the amount that was due that month~~.

===Lack of regulation===

BNPL's short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that these BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.

===Ease of debt===

Many credit lenders offer soft credit checks and low interest rates to entice un-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of gatekeeping from hard credit checks and interest rates means that more consumers are accruing easily avoided debt.

===No safeguards===

Credit card companies generally report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, BNPL services as a safer option compared to traditional credit cards.

==Examples==

~~{{Placeholder box|Some examples of {{PAGENAME}} include~~:

*[https://www.affirm.com/ '''Affirm''']

*[https://www.afterpay.com/ '''Afterpay''']

*

*[https://www.klarna.com/ '''Klarna''']

*

*[https://www.shopabunda.com/ '''Abunda''']

*}}

*PayPal

*Apple Pay

==References==

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-BNPL (Buy Now Pay Later) is a financing option being offered by more companies to increase sales. The practice partakes in an interest-free payment plan where the customer pays in installment payments because they cannot currently afford the item they currently wish to purchase in full.
+{{Incomplete}}{{ToneWarning}}
+{{Irrelevant}}
+'''Buy Now, Pay Later (BNPL)''' is a financing option for online purchases that allows consumers to pay for items in four installments. Companies such as [[Klarna]], [[Affirm]], [[PayPal]], and [[Apple Pay]] offer Buy Now, Pay Later loans at the check-out of online retailers, advertising four low payment installments. Because the lenders generally commit soft credit checks and offer interest-free installments within a short period,  BNPL is highly targeted toward those who have bad or no credit at all. It disproportionately affects vulnerable consumers, leading to major criticisms of predatory lending.
 ==How it works==
-When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely payed off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest if your unable to pay it), account fund freezes, or in worst case scenarios, be sent to a debt collector which can affect your credit score.
+When purchasing an item, the customer is contractually obligated to make installment payments on the item being purchased without interest. Plans can be divided into equal parts in which the customer will pay until the item is completely paid off. Payment plan agreements can be quite flexible ranging from weekly, bi-weekly and even monthly depending on the agreement. Missing a payment can incur late fees (which do incur interest if you're unable to pay it), account fund freezes, or in worst case scenarios, being sent to a debt collector which can affect your credit score.
 ==Why it is a problem==
-Much like credit cards, this provides consumers a false mindset in where they start to spend more than they actually have. This is due to the first initial part of the payment being a fraction of the total cost. If the consumer is not keeping track of the payments due each month (since each item being purchased may have separate agreements for when you have to pay) can lead to a Pile On effect where the customer get billed a bunch of late fees that they owe interest on because they were not able to pay the agreed upon amount. This can lead the consumer into financial ruin because they now owe the late fee (with interest if not payed immediately) plus the amount that was due that month.
+===Lack of regulation===
+BNPL's short-term payment plans and lack of immediate interest make it possible for lenders to operate outside the laws and regulations of traditional credit card companies{{Citation needed}}. In most countries, credit is defined by predetermined criteria that these BNPL fintechs purposely avoid, allowing them to act unregulated on mass populations around the world.
+===Ease of debt===
+Many credit lenders offer soft credit checks and low interest rates to entice un-creditworthy consumers. While these practices do have some benefit, particularly for financially aware individuals seeking to improve credit, these enticements often bring in consumers who are more vulnerable. Buy Now, Pay Later lenders are especially egregious in advertising to vulnerable consumers, often advertising alongside necessary online purchases such as groceries and even rent and utilities. The lack of gatekeeping from hard credit checks and interest rates means that more consumers are accruing easily avoided debt.
+===No safeguards===
+Credit card companies generally report to the major credit bureaus such as Experian, TransUnion, and Equifax. Without reporting consumer information, BNPL lenders avoid common safeguards like spending limits, thus allowing consumers to accrue hundreds or even thousands of dollars in debt that otherwise wouldn't have been possible. This is particularly harmful because consumers tend to believe, and the lenders tend to advertise, BNPL services as a safer option compared to traditional credit cards.
 ==Examples==
-{{Placeholder box|Some examples of {{PAGENAME}} include:
+*[https://www.affirm.com/ '''Affirm''']
+*[https://www.afterpay.com/ '''Afterpay''']
-*
+*[https://www.klarna.com/ '''Klarna''']
-*
+*[https://www.shopabunda.com/ '''Abunda''']
-*}}
+*PayPal
+*Apple Pay
 ==References==