CAVEAT EMPTOR

Things are not always as they seem. The free credit period that is on offer when using BNPL is not always free. There are charges that you pay for the easy and convenient payment

On low ticket-items, the BNPL’s offer of 6-8 week, no-interest repayment model, is appealing compared to the monthly revolving interest one pays on credit cards, when they don’t pay the credit card outstanding bill in full

But what happens when one defaults or delays the BNPL payment? There is no standard practice today followed by BNPL players. But each one of them charges the defaulting consumer a late fee, penalty and a higher interest on the outstanding payment that is defaulted. Several risks crop up when you go for BNPL without reading the fine print. Hidden costs, long disclosures in small print size make it difficult for consumers to know what they are getting into till they face a difficult situation.

Many consumers don’t realise that their repayment behaviour is captured through the bank transactions with BNPL players and that can impact their credit score. BNPLs, especially those in partnership with banks and NBFCs, inform the credit bureau of defaulting consumers. Availing credit through BNPL is not completely outside the purview of credit rating agencies which can come to bite you later when you really need a loan, and are denied it owing to a poor credit score.

More importantly, borrowing costs go up whenever you delay or default on payment. Just because you can buy now, pay later doesn’t mean that you should. If you have a history of compulsive spending, borrowing and credit card misuse, be cautious when choosing this option.