The Psychological Trap of Overspending
The biggest and most immediate danger of BNPL is its power to encourage impulse buying. By splitting a large payment into smaller, seemingly manageable chunks, BNPL services create a psychological distance from the actual cost. This makes it easier to justify
purchases you don't need or can't truly afford. Studies have shown that shoppers tend to spend significantly more when using BNPL compared to other payment methods. During the festive rush, when discounts are everywhere, the temptation to add 'just one more thing' to your cart can quickly lead to a mountain of small debts that add up to a major financial headache. This instant gratification model clouds financial judgment, pushing you to focus on the 'now' of getting the product, rather than the 'later' of paying for it.
Hidden Fees and the Myth of 'Zero-Cost'
While many BNPL services are advertised as 'interest-free' or 'zero-cost,' this is often only true if you pay everything back perfectly on time. The primary revenue model for many of these platforms relies on late fees. Missing a payment due date, even by a single day, can trigger hefty penalties ranging from ₹100 to ₹500 or more, sometimes with additional daily interest. Furthermore, some platforms may charge processing or 'convenience' fees for every transaction. In some 'no-cost' EMI schemes, the interest cost is subtly bundled into the product's price, meaning you pay more than you would have upfront. These charges, while small individually, accumulate rapidly and can turn a great deal into a costly mistake.
The Serious Impact on Your Credit Score
A common misconception is that BNPL doesn't affect your credit score. This is no longer true in India. The Reserve Bank of India (RBI) has brought BNPL schemes under a regulatory framework, requiring them to be linked with banks or NBFCs. Consequently, BNPL transactions are now often reported to credit bureaus like CIBIL. Each BNPL purchase can be recorded as a small-ticket personal loan on your credit report. Missing payments will negatively impact your score, making it harder to secure loans for major life events like a car or home in the future. Juggling multiple BNPL accounts is seen by lenders as a sign of being credit-hungry, which can also lower your score. Conversely, while timely payments can theoretically help build credit, their impact is often less significant than that of traditional credit products.
The Downward Spiral of Debt
The ease of signing up for multiple BNPL services across different shopping apps creates what experts call 'debt stacking' or 'shadow debt'. A small payment on Amazon Pay Later, another on Simpl, and a third on LazyPay can be easy to lose track of. Each has its own due date and terms. Before you know it, these overlapping payment schedules can consume a significant portion of your monthly income, creating a debt spiral that is difficult to escape. Many users fall into the trap of using BNPL for everyday essentials when cash is tight, which only pushes them further into a cycle of borrowing. This fragmented debt is hard to manage and can lead to chronic financial stress long after the festive season has ended.
Navigating Returns and Refunds Can Be a Hassle
What happens when you need to return an item you bought using a BNPL service? The process is often more complicated than a standard purchase. Because the transaction involves three parties—you, the merchant, and the BNPL provider—refunds can get stuck in limbo. You might successfully return the product to the seller, but if the merchant is slow to inform the BNPL provider, you could still be on the hook for payments. This can lead to frustrating disputes and even accidental late fees or negative credit reporting while you try to sort out the issue. It adds a layer of complexity to a process that is already a common pain point in online shopping.
