Starting October 10, JPMorgan Chase will no longer permit customers to use its credit cards for ‘buy now, pay later’ (BNPL) loans.
This change affects payments to installment plans from companies like Klarna, Affirm, and AfterPay.
Chase has begun informing customers about this new policy and advising them to connect alternative payment methods to avoid missing payments or incurring late fees.
According to The New York Times, Chase views BNPL loans as a form of credit, and therefore, customers won’t be able to use Chase credit cards to pay for these credit products.
The bank has its own BNPL service, Chase Pay Over Time, which allows customers to split larger purchases over $100 into monthly payments.
This service is available through participating Chase credit cards, offering payment options over six, 12, or 18 months with a fixed added fee but no interest.
Experts suggest that Chase’s decision might be a strategic push to promote its own BNPL service.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, pointed out that Chase’s move reflects a broader trend among banks to encourage the use of their own financial products rather than third-party services.
American Express and Citibank also offer their own BNPL options, and Capital One took similar measures in 2020 by restricting credit card use for BNPL loans.
Sarah Strauss from Capital One explained that their policy is designed to promote responsible debt management and avoid allowing credit cards to pay off other debts.
BNPL Financing Boom
BNPL financing gained popularity with the rise of online shopping and saw significant growth during the Covid-19 pandemic.
Typically, users do not incur interest or fees if they make timely payments over several installments.
However, missing a payment can lead to substantial fees, and critics argue that BNPL services might exploit vulnerable consumers, potentially leading to deeper debt and damaged credit scores.
Regulatory Concerns
Consumer advocates have long pushed for more regulation of the BNPL industry, especially as delinquencies on traditional credit cards increase.
Regulators and consumer groups generally disapprove of using credit cards to pay off short-term BNPL loans, as this can lead to higher interest rates if balances are not paid off monthly.
Lauren Saunders from the National Consumer Law Center criticized this practice, stating it undermines the purpose of BNPL loans.
New Consumer Protections
In response to growing concerns, the Consumer Financial Protection Bureau introduced new rules earlier this year, ensuring that BNPL companies provide similar consumer protections as credit card lenders.
This includes the right to dispute transactions and seek refunds. Rohit Chopra, director of the watchdog agency, emphasized that consumers deserve these protections regardless of their payment method.
Mine Crypto. Earn $GOATS while it is free! Click Here!!