Phantom Debt/Hidden Risk of BUY NOW, PAY LATER

Phantom Debt (phan·​tom det) - noun -

Debt that is not being reported to Credit Bureaus extended by private companies generally without interest and payable in four or fewer installments offered at the point of purchase.

Started during the pandemic, the BNPL industry is currently unregulated with very few forms of consumer protection and little oversight. Yes, there are convenient but if you miss a payment, you may be charged a reactivation fee, convenience fee and/or a late fee. Late fees can range from a few dollars up to 25% of the loan amount.

Popular companies like Klarna, Afterpay and Affirm rarely build your credit score, but if your account is sent to debt collection serious damages will occur.

BNPL plans can be convenient, but they can also lead to debt, high interest rates, and personal consumer data infractions. Some companies are starting to act more like credit cards themselves. Buy Now, Pay Later disclosures have faced criticized for lacking clear and standardized language. Another risk includes the abuse of required auto payments which can challenging for consumers to revoke.