Buy now, pay later services have rapidly grown in popularity, with 9% of consumers using them as of fall 2023. Some consumers may use credit cards to pay for popular BNPL plans such as Klarna, Afterpay and Affirm. However, Chase recently announced on cardholder statements that effective Oct. 10, 2024, Chase will no longer allow customers to use its credit cards to pay for third-party BNPL services.
What Is BNPL?
BNPL is a short-term installment plan that lets customers pay for purchases over time, often without interest. The most common plan requires a 25% down payment, then three equal payments over six weeks. However, some BNPL plans let consumers choose a larger number of payments.
BNPL services appeal to millions of consumers due to their lack of interest or fees. In addition, there is often no credit check and near-instant approval. However, some charge late fees if customers miss a payment. This can also mean a negative mark on the consumer’s credit report.
What the Change Means for Consumers
For consumers, it’s easy to see the appeal of checking the BNPL option. Instead of paying the full amount up front, you divide it into four, paying just 25% of the full price on the day of purchase. Then you pay an additional 25% every two weeks until the purchase is paid off. If all goes well, the consumer pays no interest or fees.
Credit card customers can avoid interest charges by paying for a BNPL plan with their card. In addition, customers may still receive points for the purchase, says David Shipper, strategic advisor at Datos Insights.
However, starting Oct. 10, credit card customers who attempt to use Chase credit cards to pay for BNPL plans will no longer be able to do so. Shipper notes that banks normally don’t allow customers to pay debts with a credit card except through a balance transfer.
“Since BNPL products are a form of debt, paying them with a credit card is like paying a mortgage or car loan with a credit card, which is generally not allowed or, at the very least, frowned upon,” Shipper says.
Chase has its own BNPL service, My Chase Plan.
Chase Isn’t the First Card Issuer to Ban
Chase’s decision to ban third-party BNPL purchases isn’t the first from a credit card issuer. In 2020, Capital One announced it would no longer allow customers to use its credit cards for BNPL purchases, saying these transactions bear unacceptable risk.
While many credit card issuers still allow customers to purchase third-party BNPL plans, several issuers have their own plans. Besides Chase, other examples include American Express Plan It and Citi Flex Play. For now, consumers can still use American Express and Citi credit cards to purchase third-party BNPL plans. But the fact that both issuers have their own BNPL plans opens the door to similar moves.
