I can easily afford this $1,700 impulse purchase. Is there any reason why I shouldn't use a buy now, pay later tool?

You’ve got the cash. You could swipe your paper today, wage disconnected a $1,700 measure and determination on. But Klarna is offering to divided the acquisition into 4 interest-free installments, letting you support your wealth parked successful a high-yield savings relationship a spot longer.

On paper, that sounds similar a signifier of escaped optimization. But is determination immoderate existent downside if you’re not financially stressed?

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In galore cases, yes — and the risks person little to bash with the mathematics and much to bash with however Buy Now, Pay Later (BNPL) products are designed to consciousness effortless and casual to ignore.

Klarna’s fashionable “Pay successful 4” enactment involves 4 adjacent payments, each 2 weeks, typically with nary interest.

In an Achieve Center for Consumer Insights survey of BNPL users, 34% said their superior crushed for choosing services similar Klarna was the quality to wage implicit clip without paying involvement (1) — a cardinal gully adjacent for shoppers who could different spend the acquisition outright.

Convenience and easiness of support are different communal motivators for utilizing this benignant of service. (1)

So, for a financially unchangeable shopper with wealth successful the bank, that logic seems airtight. But the convenience tin disguise immoderate little evident structural risks.

BNPL is frictionless by design, which is partially wherefore immoderate radical miss payments adjacent erstwhile they tin spend them.

LendingTree notes that 42% of BNPL users had astatine slightest 1 precocious outgo successful the past year. (2) This tin beryllium for a fig of reasons, including autopay failures, forgotten accounts oregon switching banks oregon cards.

Unlike a recognition paper measure you spot each month, BNPL payments are dispersed crossed aggregate retailers, each with its ain schedule. That means a failed debit, expired paper oregon closed relationship tin softly propulsion you into delinquency.

Klarna warns that missed payments could effect successful precocious fees and collections activity. (3)

BNPL plans are often presented astatine checkout arsenic a quick, interest-free mode to “split” a acquisition alternatively than arsenic a accepted loan. But regulators enactment that these plans are inactive a signifier of recognition with much conditions and less protections than recognition cards (more connected this later).

It's important to cognize that services similar Klarna whitethorn study immoderate outgo enactment to recognition bureaus, peculiarly erstwhile accounts go delinquent oregon default (4).