Consumer watchdog exposes troubling downsides of Buy Now, Pay Later credit.

“Buy now, pay later”? How about “buy now, pay later, it might be hell”?

Consumers have been sent a stark warning that Buy Now Pay Later (BNPL) has all sorts of pitfalls to address. loan.

“Please note that the BNPL plan does not provide federal protection associated with credit card purchases. We can’t guarantee you’ll have to repay the loan,” said Hannah Rhodes and Teresa Murray of the US PIRG’s Consumer Watchdog team in their Pitfall Protection Bulletin.

“The federal government provides credit card users with that protection.”

Hidden Fees, Interest and Debt Collection

Rhodes and Murray said complaints against BNPL companies are increasing. Hidden fees, interest, debt collection, and customer service are all factors that anger BNPL users.

Research shows that the demographic target of successful BNPLs is young people who may not understand the business model. In addition, as the size of the “basket” increases, consumers will buy more items they don’t need or can’t afford.

Know what you’re signing up for

Rhodes and Murray believe that with inflation rising this holiday season and many tightening their budgets, more consumers are tempted to take advantage of the “buy now, pay later” offer without fully understanding it. He said he would likely consider it.

BNPL works like this:

• You purchase the item and agree to pay the invoice in 4 installments over 6 weeks.

• Make your first payment at checkout using a debit or credit card.

• The remaining three payments are made every two weeks regardless of whether you have money in your checking account or available on your credit card. If it’s a “whether”, be prepared for possible overdraft or cap charges of $30 or more.

Best and worst scenarios

The best-case scenario is to pay off in time without having to return the item without a fee. Worst case scenario? Hmm… actually there are multiple things that can go wrong, so it should be pluralized.

“Shoppers don’t know if there are terms and conditions they don’t read or understand, or to make multiple purchases using BNPL to process all their payments lining up like planes on an airport runway. If you don’t have a budget for it, you’re going to run into problems,” said Watchdog.

“Then there is consumer protection that is overlooked by not paying with a credit card in the first place. Regardless of the reason, we may not be able to accept returns or exchanges.”