Buy now, pay later: Difference between revisions

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'''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 ~~financers~~ generally commit soft credit checks and offer interest-free ~~monthly~~ 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.

'''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==

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==Why it is a problem==

Much like credit cards, this provides consumers with a false mindset in which 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 payment dates that are due (since each item being purchased may have separate agreements for when you have to pay), this can lead to a pile-on effect where the customer gets 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 paid immediately) plus the amount that was due. This increases the chances that the next payment owed will be late, leading the consumer into a debt cycle which can eventually lead to bankruptcy.

~~And even in an ideal scenario, when no~~ interest ~~or late fees are owed,~~ the ~~final price is still typically more expensive than the normal sale price~~. ~~For example~~, ~~a couch~~ that ~~sells for $300 could have a~~ BNPL ~~price of $30 a month. This might initially seem like a better deal~~, ~~as you'll pay less money at a time, but~~ the ~~total cost of BNPL would be $360~~.

=== 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.

==~~Examples~~==

=== 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. The lack of gatekeeping from hard credit checks and interest rates means that more consumers are accruing easily avoided debt.

== Examples ==

*[https://www.affirm.com/ '''Affirm'''] to pay for your groceries.

*[https://www.afterpay.com/ '''Afterpay'''] to pay for gas.

*[https://www.klarna.com/ '''Klarna'''] to pay for Doordash deliveries.

*[https://www.shopabunda.com/ '''Abunda'''] to pay for clothes and household items.

*PayPal

*Apple Pay

==References==

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 {{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 financers generally commit soft credit checks and offer interest-free monthly 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.
+'''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==
@@ Line 8: / Line 8: @@
 ==Why it is a problem==
-Much like credit cards, this provides consumers with a false mindset in which 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 payment dates that are due (since each item being purchased may have separate agreements for when you have to pay), this can lead to a pile-on effect where the customer gets 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 paid immediately) plus the amount that was due. This increases the chances that the next payment owed will be late, leading the consumer into a debt cycle which can eventually lead to bankruptcy.
-And even in an ideal scenario, when no interest or late fees are owed, the final price is still typically more expensive than the normal sale price. For example, a couch that sells for $300 could have a BNPL price of $30 a month. This might initially seem like a better deal, as you'll pay less money at a time, but the total cost of BNPL would be $360.
+=== 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.
-==Examples==
+=== 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. The lack of gatekeeping from hard credit checks and interest rates means that more consumers are accruing easily avoided debt.
+== Examples ==
 *[https://www.affirm.com/ '''Affirm'''] to pay for your groceries.
 *[https://www.afterpay.com/ '''Afterpay'''] to pay for gas.
 *[https://www.klarna.com/ '''Klarna'''] to pay for Doordash deliveries.
 *[https://www.shopabunda.com/ '''Abunda'''] to pay for clothes and household items.
+*PayPal
+*Apple Pay
 ==References==