![]() ![]() When she tried to publicly request help on Klarna’s Facebook page, she said, her comments were deleted. Multiple agents promised a supervisor would contact her, but the call never came. The bookcase never arrived, so she reached out to Klarna to get a partial refund. In January, Brittany Conn, 30, was moving into a new apartment in Melbourne, Fla., and used Klarna on Wayfair to buy a bed frame, headboard and bookcase for $450. “They don’t know what the issue is,” said Angela Hunt, 31, of Hampton, Va., part of a Facebook group devoted to Klarna, in which members frequently complain they are denied approval for purchases in a seemingly random manner.Īpp users also don’t enjoy the same billing-dispute protections they would with other payment methods, so returning merchandise, resolving fraudulent charges and requesting refunds can be difficult. That means users have no assurance a transaction will be approved. No such rules apply to the apps, which authorize every purchase on a case-by-case basis. The Credit Karma survey found about 38% of buy-now-pay-later customers had missed at least one payment, and 72% of those users reported seeing their credit score drop afterward, though many factors can cause fluctuations.īuy-now-pay-later users also don’t benefit from many protections applied to credit cards.įor instance, if a credit card company refuses to offer credit to a potential customer, it must disclose why the application was declined. That’s appealing to consumers under pressure or already cut off from traditional lenders.īut not reporting on-time payments also means that users don’t see their credit scores increase as they demonstrate a track record of responsible borrowing, a crucial hurdle for younger consumers.Īnd the apps may report missed or late payments for some payment plans, which can hurt users’ credit scores, according to a clause buried deep in terms and conditions agreements for Quadpay, Affirm and Klarna. Services boast that users’ activity and debt are not regularly reported to major credit bureaus. Voechting promptly gathered the money, fearing more damage to her credit. Sixty days later, she was informed the installment would go to collections unless she paid off the full remaining balance of $54, plus a $10 late fee. Voechting said that for the most part she has been able to control her spending and keep track of when her payments will be withdrawn, a challenge when dealing with multiple purchases and multiple apps.īut this year, she missed a payment with Quadpay on a $120 order from Beautycounter because she failed to change her payment information in the app after receiving a new debit card. Problems quickly arise when there is not enough money in the account, potentially resulting in charges by both the user’s bank and the app. The apps offer different repayment options, but the most common links to a user’s debit card and makes automatic withdrawals every two weeks. “It sounds too good to be true, and it is, in many ways, because there are perils for people who use this,” said Jamie Court, president of Consumer Watchdog. ![]() Some apps, such as Quadpay, charge a $1 transaction fee on every payment made, regardless of the amount. Using celebrities such as A$AP Rocky and Keke Palmer to portray the services as a hip alternative to the “gotcha” fine print of credit cards, the apps could promote overborrowing in a generation already struggling with high debt and poor credit, consumer advocates warn.Īnd despite claims that users’ credit ratings won’t be affected and that there are no hidden fees, experts say consumers can still face late charges, overdraft fees and debt collection. ![]() regulators are taking a wait-and-see approach, saying they don’t want to stifle a new financial product that could help consumers who might otherwise fall into predatory lending schemes.īut regulators in Europe and Australia, where many of the companies first launched, are increasingly concerned the apps are extending credit irresponsibly. Roughly 42% of Americans report using the apps at least once, according to a Credit Karma survey from February. Retailers such as Macy’s and H&M have jumped to partner with the services, which soared in popularity during the COVID-19 pandemic. The apps are taking off among millennials and Generation Z consumers attracted by the ability to bypass traditional credit cards and still delay payments with no interest. The companies act as intermediaries between retailers and consumers, making most of their profit by charging merchants 2% to 8% of the purchase price, similar to the retailer fees levied by credit card companies. ![]()
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