Buy now, regret later: Expert on why shoppers should think twice before using BNPL

Buy Now, Pay Later (BNPL) schemes in India, initially seen as convenient and consumer-friendly, have increasingly come under scrutiny for their potential to entangle users in a cycle of debt. While BNPL offers the allure of interest-free, short-term financing, it may lead consumers into habitual spending patterns that are difficult to break. As users transition from using this as a one-time convenience to a regular dependency, they can find themselves perpetually behind in their finances, accumulating debt without realizing the long-term implications. The ease of access to credit can make it tempting to purchase items beyond one's means, fostering a culture of overspending.

BNPL, often marketed as a budgeting tool, transforms user behavior by shifting the focus from affordability to managing monthly installments. This shift creates an illusion of affordability, which can lead to overspending. As CA Abhishek Walia points out, “BNPL is not a budgeting hack. It’s debt packaged to feel harmless. But behind that ease lies a system designed to make you spend more, track less, and default quietly.”

The hidden costs of BNPL become apparent with late fees and impact on credit scores. Missed payments can quickly escalate from minor fees to significant financial burdens. For instance, a purchase that started at Rs 1,999 can become Rs 2,599 with penalties. This is compounded by the fact that BNPL platforms often do not report to credit bureaus as clearly as credit cards do, leading to potential credit score damage. “This is not financial freedom. This is financial leakage,” warn industry experts.

Moreover, the impact on credit scores can last for years, affecting future financial opportunities. Even small defaults can lead to higher interest rates on other loans, lower credit card limits, and difficulties in securing larger credit lines like home loans. Walia highlights the challenge, stating, “Unlike credit cards, BNPL platforms don’t always report clearly to bureaus, and many don’t offer consistent statements. That makes tracking harder and defaults easier.”

The lifestyle transformation from occasional use to habitual debt is a key concern with BNPL. Once consumers start using BNPL for various purchases, from clothing to food delivery, the line between needs and wants blurs, and borrowing becomes normalized. This can result in consumers living perpetually beyond their means, unable to keep up with their financial obligations. The normalization of debt can have profound effects on financial health, eroding savings and limiting future financial freedom.

To resist the entrapment of BNPL schemes, consumers should prioritize peace of mind over temporary lifestyle upgrades. The financial security that comes from prudent spending outweighs the allure of immediate gratification without upfront costs. Walia aptly advises, “If you can’t pay for it now, you probably shouldn’t pay for it later.”

BNPL can still serve as a useful financial tool if used with caution and responsibility. Consumers need to be aware of its potential pitfalls and approach it with a disciplined mindset. Understanding the true costs and implications is crucial to avoid falling into debt traps.

In conclusion, while BNPL offers a sleek and seemingly easy way to manage payments, the hidden costs and behavioral shifts it fosters can have lasting financial consequences. As the BNPL market in India grows, consumers must exercise caution and financial literacy to navigate its potential challenges. By maintaining awareness and control over spending habits, individuals can protect themselves from the debt cycle that BNPL can inadvertently promote.