Buy Now Pay Later (BNPL) is a form of finance where you purchase goods or services without paying upfront, instead spreading out payments over a set time period, paying back what you owe bit by bit. There are a number of reasons why you might be denied BNPL services, so let’s delve right in…
Credit History
BNPL providers typically conduct soft credit checks; they can assess your credit score and credit history to decide whether they want to lend you money.
It’s important to remember that BNPL is a form of credit (even if these firms aren’t yet regulated as such) and this means some of the same steps will apply as they do for taking out a loan, for example. If you have a poor credit history, you may face even higher interest rates, or be rejected from their services entirely
Missing Payments
If you have a track record of failing to make your payments on time and in full when paying back BNPL finance, they might ban you from using their services in the future.
You should also remember that making late payments to a BNPL provider may lead to you incurring late fees, facing interest charges, and can even negatively affect your credit score. Consistently failing to make payments could even lead to your debt being sent to a debt collection agency
Fraud
BNPL providers may choose to ban or suspend your account if they think a fraudulent transaction has been made or they detect suspicious activity.
To help protect your accounts from fraud (not just BNPL accounts), you should always use strong passwords, enable two-factor authentication when available, monitor your accounts, and regularly check your banking transactions
Credit Card Restrictions
some credit card providers have banned their cards from being used for BNPL payments.
This may be due to various reasons, such as getting customers to use their own BNPL services, concerns of fraud, or concerns of misuse with the risks of BNPL services not being properly understood.
A Word of Warning…
The option of BNPL can be very tempting to consumers as it means they don’t have to pay for things in one lump sum payment. However, if you aren’t really careful, this can easily lead to you spending more than you can afford, leaving your budget behind in the dust.
As part of our Credit & Debt mini course, we speak in more detail about BNPL, along with other types of credit and debt, such as credit cards, loans, student finance, overdrafts, and more. Why not give it a whirl and check out our online academy today?