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Is buy now, pay later debt?

Jun 6, 2024 | News

Buy Now, Pay Later (BNPL) is a pretty popular way to pay for pricier items nowadays. It’s an alternative to credit cards, and it has a couple benefits. BNPL is usually easy to use and doesn’t charge interest.

But to answer the question posed in the headline: yes, BNPL is still debt. It’s classified as a short-term loan (even without the interest rates).

As with all debt, you should know your way around it before diving in. Here are three potential dangers to know about BNPL:

  1. BNPL late payment fees are sneaky. No interest often leads people to ignore the fees involved. BNPL companies still expect on-time payments, and they charge late fees whenever payments are missed. These can quickly pile up if you aren’t careful.
  2. BNPL makes buying too easy. BNPL lets you buy pricey items and pay them off over multiple installments. The sticker price might highlight a smaller installment cost while downplaying the higher overall price. Since you see the cost as smaller, you purchase more than you should. This leads to a short-term debt rut over time.
  3. BNPL can affect your credit score. BNPL still affects your credit score. BNPL providers send you to collections if you don’t pay the bill (and any late charges). A collector can report your non-payment, ultimately lowering your credit score.

BNPL has its advantages, and we hope these warnings help you use it well. But if you want to go the classic credit card route with someone you trust, your credit union is ready to give you a helping hand.

Apply for a credit card today!

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