You see them on about every shopping site now. Think of “BNPL” (buy now, pay later) as a short-term financing plan. With a few clicks, you request a limited loan agreement to pay for items over time.
Even Apple is getting in on the action. With Apple Pay Later, buy that $1,000 iPhone today and pay it off over four payments. PayPal has one, too, along with services like Afterpay, Affirm and Klarna.
I like to put on my detective hat (it looks like Columbo’s) when a new wave of financing apps like these pops up. They can feel a little … scammy. Hidden strings can lead to unexpected charges, unpleasant contracts and new debt disasters. Not cool! But certain BNPL apps with “soft” credit checks, like Apple’s service, can help manage payments.
Don’t worry. I’m on the case! If you or a loved one is using buy now, pay later apps, I’ve got the red flags you need to watch for to avoid rotten deals.
Red flag 1: Sneaky interest rates
Almost all BNPL apps say they have “zero interest payments.” For some, like Apple, that’s true. If you make payments to your Apple Card account on time, you won’t accrue interest. But BNPL apps aren’t well-regulated, and some make false promises and hide interest rates in the fine print.
Sorry to say, but you need to grab your reading glasses. Check every line and link of fine print for hidden interest rates. As a rule, don’t accept any form of interest rate, even 1% or 1.5%. That may sound great on a mortgage — but you can get these mini loans for zero interest!
Red flag 2: Hidden fees
Late fees are standard for BNPL apps. Miss a payment? You’re gonna get some heat. But hidden fees are the real worms in the apple. Surveys have found that almost 30% of people who use BNPL run into problems, like being overcharged for a purchase for no reason. No good.
Hit the Better Business Bureau site and check for anything concerning before you say “Yes, please.”
Red flag 3: You can’t buy that
Even reputable BNPLs have limits. They’ll only work with specific merchants, for example. Check to see if that big purchase is covered before signing up.
Limitations apply to certain states, too. PayPal’s “Pay in 4” doesn’t work in Montana or Nevada. Its “Pay Monthly” doesn’t work in states like Alaska, Texas and Massachusetts. Other services have similar state requirements. That’s a big Proceed With Caution sign.
Own a business? Try it
If you sell things online, it might be worth partnering up with one of the big BNPL providers. An excellent upside is you get paid upfront. People can’t dispute those charges like they do with a credit card.
What if you don’t pay your BNPL loan?
Despite what many of these companies would have you believe, not paying one of those loans can impact your credit.
If you don’t repay your BNPL loan, it could be turned over to a debt collector and shared with a credit reporting company. It’s your job to stay on top of things and know what you owe and when payment is due.
Each BNPL service has simple ways to check your balances. Here are the steps for the top BNPL services.
PayPal pay in 4 plan:
- Log into your PayPal account.
- Within the Pay Later section, click on the specific Pay in 4 plan in reference. The amount you still owe will be under “Remaining.”
- You can locate the amounts of previous repayments in your Plan Activity. You can also reference the amounts of upcoming repayments by clicking See Upcoming Payments.
PayPal also has a monthly installment feature in its BNPL service. You can see details in the PayPal App by clicking Pay Later. There, you can view the balance, payment schedule and transaction details. You can also make payments, set up autopay, change your payment method and more. To view details on your desktop, click Pay Later under the “Wallet” section.
Apple Pay Later:
- On your iPhone, open the Wallet app and tap Apple Pay Later. On your iPad, go to Settings and tap Wallet & Apple Pay. Then tap Apple Pay Later and tap Purchases.
- Scroll down to see upcoming payments due, a summary of your purchases and the total amounts owed for each of your Apple Pay Later loans.
- To see your payment schedule for an active loan, tap the purchase. From here, you can also make a loan payment or manage your autopay settings.
- To see your payment history for a completed purchase, tap Completed under the Purchases section. From here, you can see all previous loans.
- To see your loan agreement, tap the purchase. Tap the Total Cost amount, then tap View Loan Agreement.
Afterpay:
When you log into your Afterpay account via the website and click on the home page, you will see a summary of your estimated amount available to spend, the total you owe, and an overview of your orders and the amount owed.
Affirm:
Locating your balance with Affirm is easy. You can view your balance at Affirm.com or in the Affirm app.
On the site:
- Sign in to your account.
- Click Pay at the top of the screen.
- Select a purchase to see the remaining balance and other details.
On the app:
- Sign in to your account.
- Tap Manage at the bottom of the screen.
- See the purchase balance at the top of the screen, or tap a purchase to see its remaining balance and other details.
Klarna:
- Go to Payments to see your orders.
- Select an order to view your payment plan.
One more thing…
You don’t need a trench coat and hat to spot significant issues with BNPLs. But you do have to watch for clues that something’s wrong. Follow up my tips with a look at the latest retail scams, my collection of email scam examples, and just how common scams still are!