Dangers of BNPL

lr1277

There is an article in yesterday's NY Times about the dangers of Buy Now Pay later.

I know it is based on the American financial system but I am sure some of the tactics used by the BNPL companies will be universal. The comments are interesting, especially those ones where the article's author has replied to the comment.

I subscribe to the NY Times so can see the article. It used to be that NY Times had a 5 article per month limit. Now Google AI suggests it is a personalied number with anything upto 20 free articles per month.

Here is the link:

https://www.nytimes.com/2025/10/07/magazine/buy-now-pay-later-klarna-affirm-shopping.html

If you don't want to use my link, search the internet for:

NY Times bnpl

There are 2 articles from the NY Times. One dated September which talks about BNPL used for travel (and which I have not read).

The other article is from October 2025 and is the article to which I am referring.

The scary thing is credit cards (including Amex) are branching out into BNPL as a way to increase their profits.

MyRealNameToo

Given the majority dont subscribe it may be worth saying what the salient points are and why you are concerned with existing lenders getting into BNPL?

The synopsis seems to suggest it's an article complaining about the increase in consumerism fuelled by short term debt and people then being unable to pay for the stuff they didnt really need. The title suggests there is more to it than that though but dont subscribe so can't comment. 

lr1277

Will get onto that later on today.

QrizB

MyRealNameToo said:

Given the majority dont subscribe it may be worth saying what the salient points are and why you are concerned with existing lenders getting into BNPL?

Try this archive link:

https://archive.is/6TB9l

CliveOfIndia

QrizB said:

Try this archive link:

https://archive.is/6TB9l

Thanks for the link, very helpful.

So, to summarise the article, people see a BNPL offer then use it to buy things they neither need nor can afford.  More fool them.  Especially if they're only buying it because they've seen some "influencer" on social media raving about it.  What happened to taking responsibility for your own actions?

Is it really any different to a credit card?  I'm sure there are many thousands of people in the country who have access to pretty high credit limits, but are self-disciplined enough not to spend what they can't afford.

MyRealNameToo

CliveOfIndia said:

Is it really any different to a credit card?  I'm sure there are many thousands of people in the country who have access to pretty high credit limits, but are self-disciplined enough not to spend what they can't afford.

Yes, because these are typically "interest free" perpetually not the 20% APR of a card or where you need to shop around to find a new credit card deal. 

I dont know about the US but here most of these are outside of the scope of the CCA because they are too short, no interest, only a couple of repayments so that means no complaint to the FOS on the rounds of irresponsible lending etc when you collapse under the mountain of debt you've gotten yourself into trying to keep up with the jones 

Still dont see what the OP's issue with existing lenders getting into the space is nor the articles claim that the subject had lost track of which repayment is for which debt and which debt is for which product. 

Brie

MyRealNameToo said:

CliveOfIndia said:

Is it really any different to a credit card?  I'm sure there are many thousands of people in the country who have access to pretty high credit limits, but are self-disciplined enough not to spend what they can't afford.

Yes, because these are typically "interest free" perpetually not the 20% APR of a card or where you need to shop around to find a new credit card deal. 

I dont know about the US but here most of these are outside of the scope of the CCA because they are too short, no interest, only a couple of repayments so that means no complaint to the FOS on the rounds of irresponsible lending etc when you collapse under the mountain of debt you've gotten yourself into trying to keep up with the jones 

Still dont see what the OP's issue with existing lenders getting into the space is nor the articles claim that the subject had lost track of which repayment is for which debt and which debt is for which product. 

So the BNPL companies are making money from the supplier not the buyer.  Hence no need for interest.  So a £100 (or in this case $100) purchase costs just £100 and not a moving target amount that one gets with a CC.  

But in debt terms, and as is neatly pointed out in the article, the BNPLs will give higher limits than a CC.  ($12k vs $2k is quoted) And the individual spends 100 and pays off a portion, say 20, and then spends another 100 so owes 180 and so on up the limit.  And then they get (as the woman featured did) into moving money/credit from CCs to  bank accounts to other CCs to BNPL apps to allow them to buy one more fabulous needed something.  It's at that point she wouldn't know what the debt on the CC had actually been used for as it would have been part of a big shuffle about like mixing cards on a table.  

All very interesting.  And of course relevant to anyone dealing with debt whether you are a bank, a customer or a debt adviser.  Because people don't keep track and the debt mounts up until there is a crisis.  And it's one where not everyone gets out alive. (literally, sadly)

The sooner this is regulated the better.  

Theleak250

It’s big banks as well, HSBC now offers repayment plans on credit card purchases when you use apple pay. I believe Amex does as well.

it’s a lot easier to get into debt. But at the same time, a person should be responsible for their own spending. My father lost it all due to credit card overspending. One imagines these days there is an even bigger bubble of debt growing that will leave many devastated.  It’s an unfortunate fact of life that some people just cannot handle money, and will always end up in trouble. The whole nature of credit is bad, my bank who issued my mortgage (so knows how much I need to pay each month) would happily let me spend on their credit card and put me at risk of missing a payment. In my opinion, they want you to do that so you are never free.

I have noticed the big banks are becoming more reluctant to lend because I suspect they know the bubble will burst to an extent where a lot of the debt will be written off, so they have pushed it too far. They have changed the rules recently to allow more lending on homes, it’s just to keep it all going a bit more time. This will also happen with these BNPY schemes. I wonder what the plan is, other than share holders making a profit while
the system is still functioning and they will exit before it collapses.

Personally I think the whole system will crash and currencies as we know them will lose most of their value due to these debts. It will probably take another 10-15 years. By this I mean our currencies will be eroded more and more over time until they do not hold much power. This is slightly different to inflation which of course is also ramping up, and they are losing control already. 

MyRealNameToo

Brie said:

MyRealNameToo said:

CliveOfIndia said:

Is it really any different to a credit card?  I'm sure there are many thousands of people in the country who have access to pretty high credit limits, but are self-disciplined enough not to spend what they can't afford.

Yes, because these are typically "interest free" perpetually not the 20% APR of a card or where you need to shop around to find a new credit card deal. 

I dont know about the US but here most of these are outside of the scope of the CCA because they are too short, no interest, only a couple of repayments so that means no complaint to the FOS on the rounds of irresponsible lending etc when you collapse under the mountain of debt you've gotten yourself into trying to keep up with the jones 

Still dont see what the OP's issue with existing lenders getting into the space is nor the articles claim that the subject had lost track of which repayment is for which debt and which debt is for which product. 

So the BNPL companies are making money from the supplier not the buyer.  Hence no need for interest.  So a £100 (or in this case $100) purchase costs just £100 and not a moving target amount that one gets with a CC.  

But in debt terms, and as is neatly pointed out in the article, the BNPLs will give higher limits than a CC.  ($12k vs $2k is quoted) And the individual spends 100 and pays off a portion, say 20, and then spends another 100 so owes 180 and so on up the limit.  And then they get (as the woman featured did) into moving money/credit from CCs to  bank accounts to other CCs to BNPL apps to allow them to buy one more fabulous needed something.  It's at that point she wouldn't know what the debt on the CC had actually been used for as it would have been part of a big shuffle about like mixing cards on a table.  

All very interesting.  And of course relevant to anyone dealing with debt whether you are a bank, a customer or a debt adviser.  Because people don't keep track and the debt mounts up until there is a crisis.  And it's one where not everyone gets out alive. (literally, sadly)

The sooner this is regulated the better.  

Most offer a range of options both in terms of interest and payment terms, in the UK they sell both regulated and unregulated lending options. 

They have made their mark with the "pay in 3" type option where yes, you buy something for £99, the BNPL company pays the merchant circa £92 up front and then you pay the BNPL company £33 per month. According to the article those buying with this type of credit are typically spending more per purchase so they are playing a similar game to how AmEx used to justify their higher fees to merchants... "our customers will spend more money in your shop than your average punter"

Merchants can choose to get the full £99 but then interest will be charged on the loan, though if it stays as a pay in 3 it will remain an unregulated loan. 

I've not dealt with the CCA or loan regulation in many years but historically there was a reluctance to make all lending regulated. Our cornershop gives tick to its regulars requiring them to pay it off on Fridays, in principle this low value informal lending could be caught up in regs. 

Theleak250 said:

It’s big banks as well, HSBC now offers repayment plans on credit card purchases when you use apple pay. I believe Amex does as well.

Dont get what you mean? Credit cards have always had repayment plans, thats what differentiates them from charge cards and debit cards.

Theleak250 said:
I have noticed the big banks are becoming more reluctant to lend because I suspect they know the bubble will burst to an extent where a lot of the debt will be written off, so they have pushed it too far. They have changed the rules recently to allow more lending on homes, it’s just to keep it all going a bit more time. This will also happen with these BNPY schemes. I wonder what the plan is, other than share holders making a profit while

the system is still functioning and they will exit before it collapses.

Personally I think the whole system will crash and currencies as we know them will lose most of their value due to these debts. It will probably take another 10-15 years. By this I mean our currencies will be eroded more and more over time until they do not hold much power. This is slightly different to inflation which of course is also ramping up, and they are losing control already. 

There has been a big push on affordability by the FCA and the FOS writing off interest (and debts) where they deem the bank didnt consider if the customer could afford the debt despite the fact its the customer asked for it and complained when they didnt get the limit they hoped for. 

Whilst we think about in terms of loans and credit cards the impacts have been felt wider too, I know certain direct insurers have always offered instalments to every customer on the basis they can simply cancel the policy if the customer doesnt pay so their risks were low. Now they could face sanction if they were giving these effective loans to people who couldn't afford them there was a race to implement more checks before deciding if to offer credit or not.

dreaming

Discussions such as these just confirm my belief that finances ought to be part of the national curriculum, which I know Martin Lewis is also an advocate of.  It's all very well learning maths but applying those lessons to reality just doesn't seem to work for many people in my experience. Several young adults I know have told me they started their working lives with little knowledge about tax, national insurance or pensions, even those who had attended college/university. These things were not explained to them in their education (except for maybe one or two lessons in PSE - whatever that is) and in most cases were not discussed within their families. The majority had been offered, and taken out, credit cards without any real understanding of the implications of only paying the minimum. This lack of knowledge or understanding is not just confined to a particular age group as I also know people of all ages who see credit cards and payment plans as virtually "free money". Sometimes people get burned once and learn their lesson but others just jump from credit card to loans etc., robbing Peter to pay Paul and end up in difficult situations. Some really are just one step away from financial disaster such as a sudden emergency such as large appliance breakdown/illness/redundancy. Parents/carers/schools/colleges - please discuss these things with your youngsters (and older if required) so we can have a much better informed population and reduce headlines about debt epidemics.

Theleak250

@MyRealNameToo I mean that as below, it’s extremely easy to buy now and pay later. And have multiple plans. Before it took more effort. I believe the article made a point that it became too much having the plans and the ease of getting them. As below this is the HSBC offering. Yes the actual instalment plan is not new as such, but entering it at point of purchase so easily is.

https://www.hsbc.co.uk/credit-cards/existing-customers/instalments-on-apple-pay/