The hidden financial risks of buy now, pay later schemes
Buy Now, Pay Later offers have been the preference payment method among Indian web shoppers. They appear to make expensive purchases surprisingly affordable with no deposit and convenient instalments. But behind the convenience lie a web of hidden fees, credit traps, and overspending snares. Use BNPL recklessly, and it can silently blow your budget off course and trap you in a debt cycle you never expected.
The draw—and the trap—of BNPL Buy Now, Pay Later (BNPL) offerings have become more popular than ever with younger online consumers. A couple of clicks and you can pay your bill in easy monthly payments with no interest charged at the time—what's not to like? But beneath this smooth, interest-free veneer is a delicate web of fees, charges, and credit risk that most customers are oblivious to. In the long run, this convenience can turn into a costly financial headache.
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Hidden costs that add up fast Although all BNPL providers offer zero interest for short-term payments, they charge late payment fees, processing fees, and penalty interest charges. If you miss a payment of just one instalment, you'll pay hefty fees—occasionally ₹500 to ₹1,000 per delay. Also, some platforms charge convenience fees or GST for services that get added to your total bill. All these tiny charges add up to a lofty extra cost.
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A quiet blow to your credit score Repetitive use of BNPL services can also affect your credit history. Some websites report defaults to credit bureaus, and late payments will lower your credit score. Even when you pay on time, too many BNPL offers at once can make you appear credit-hungry when lenders review your financial history. This negatively affects your chances of getting a personal loan, home loan, or even a credit card in the future.
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Incentivizing over-spending and borrowing The ease of not paying upfront typically leads to impulse purchases. Without feeling the pinch of paying upfront, you would end up spending more. BNPL creates a short-term perception of affordability, and that encourages people to buy electronics, clothing, and services that they would not necessarily need or can't actually afford. Consumers can end up with multiple active BNPL debts in the long run, so it becomes even harder to manage repayments—leading to a debt trap that is difficult to manage.
Limited consumer protection and transparency Compared to highly regulated credit cards, BNPL platforms lie in between with consumers having fewer protections. Terms and conditions become unclear, with little-seen clauses hidden inside fine prints. Refund and cancellation also become inconvenient, especially when there is a disagreement between you and the merchant. Typically, customers continue getting charged EMIs even when the product has been returned, thanks to gaps in communication between merchants and BNPL vendors.
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Use with caution, not carelessness BNPL may seem like the smartest option for stretching your money, but the true expense is how and how much you use it. Treat it as a short-term convenience—not as a regular financing method. Keep tabs on your dues, don't pile payments across platforms, and never click 'Pay Later' without checking the terms. Used responsibly, it can benefit you. Left unchecked, however, your BNPL habit could end up costing you a lot more than you had hoped for.
