Buy-Now, Pay-Later Risks
New payment plans, such as the Buy-Now, Pay-Later plan, offer less protection to consumers who use it.
The COVID-19 pandemic has boosted the growth of the online shopping market.
A lot of consumers do most of the transactions and shopping online. Because of this, new payment methods have been provided to cater to the market’s needs.
The BNPL Payment Method
One of the newest and most popular payment methods is the “buy-now, pay-later” (BNPL) plan. This method allows online shoppers to pay upfront only 25% of their total purchase.
The rest of the payments can be divided through three equal installments within six weeks from the date of purchase.
Because of this, consumers can instantly buy their items at the checkout page without the need to shell out the full amount.
The new payment method also promises consumers that it does not have additional charges, making it a desirable option to tight-budgeted customers.
Other consumers also use this payment method for short-term loans, especially individuals who do not have credit cards since the BNPL allows them to spread out payments.
One of these consumers is a 51-year-old Tampa resident named Leisa Meredith.
According to Meredith, she was able to take advantage of the BNPL plan by using it to spend on her necessities while she is rebuilding her funds after suffering from bankruptcy.
While BNPL has many perks, it does not offer some of the protection provided by a traditional payment method, such as a credit card.
One of the risks is the hidden additional fees in the BNPL. Though it is advertised that there are no extra charges, this is only true if the consumer can pay on time.
There are individual variations of the BNPL that charge customers fees and interest if they cannot make payments on time.
On top of this, it is harder for customers who have used the BNPL payment method to get refunds for the items they have purchased.
Even if the items are defective, getting refunds is more lengthy than traditional payment methods.
Customers will need to submit and process both the BNPL lender and the retailer’s requirements before obtaining their reimbursements.
Since the BNPL method also makes it easier for consumers to purchase items instantly, they are also more susceptible to overspending. Customers are more at risk of buying items they do not need and cannot afford.
Also, payments made through BNPL are harder to track. When consumers made multiple purchases through BNPL, they may lose track of all the purchases they made online, causing them to have late payment charges.
BNPL is also relatively new. Because of this, federal regulations and rules about the program have not yet been fully established.
For example, consumers cannot abruptly stop their payments of disputed transactions.
They would first need to contact the retailers and rely on the retailers to avoid the transaction and coordinate with the BNPL lenders before the disputes can be handled.
Tips on Using BNPL
Though BNPL is a very convenient payment method, consumers should be careful when using it to avoid the pitfalls that come with it.
Consumers will need to exercise extra discipline to avoid overspending on products they do not need. It is advised to use BNPL when making planned purchases.
Since BNPL is also new, customers have to be careful when signing up for a BNPL program. Customers should exercise extra caution and should thoroughly read the FAQs to make sure they have enough protection.
It is also advised that customers set up automatic payments for BNPL transactions to avoid incurring late payment charges for transactions customers cannot track.
Customers should also avoid using BNPL when making purchases with obscure retailers.
Since refund processes rely on heavy coordination with retailers, it is advisable to make transactions with well-known and reputable retailers only when using BNPL.
Lastly, if customers qualify for a credit card, it is still better to use it than BNPL.
A credit card gives users the same perks as BNPL, with the bonus of allowing users to build their credit score.
Besides, credit cards also give users more protection, covered by federal regulations, than BNPL.
Editor’s Note on The Truth About BNPL Plans – Buy Now, Pay Later:
This article is published to inform you of the new “Buy-Now, Pay-Later” payment method.
What are your thoughts on this piece? Have you purchased any items online using BNPL?
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