Many Of Us Use This Buying Method Without Knowing The Risks

Portable credit card reader in hand
Via Unsplash
Alyssa Guzik
February 7, 2023

The current economic situation has many of us needing help finding extra dollars. The rise of buy now, pay later (BNPL) programs has been helping us out of tight spots. But there are some downsides.

We've all been in a position where there's something we want or need but can't afford. Services like Klarna, After Pay, and even Apple offer people the option to buy and then pay in installments.

So what's the catch?

 

BNPL companies are great when making large purchases like furniture or back-to-school buys. Smaller purchases, however, tend to cause the most damage. These programs charge late fees equivalent to or higher than the interest on credit cards for missed payments.

BNPL programs don't report on-time payments to credit bureaus, though they do report delinquencies. Around 40% of African Americans have used BNPL in the last 12 months. Approximately 50% of that number have missed at least one payment, and 21% had their debt sent to collections.

As a community, we already deal with a lack of access to credit. BNPL services can be helpful, but  they can also cause us to rack up debt fast, leaving us even shorter on money than when we started. Shop wisely.

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