Consumers Concerned Over Credit Report Surprises Due to BNPL Plans, According to GoCardless Study

GoCardless study shows that 30% of consumers are concerned about BNPL plans included on credit reports

SAN FRANCISCO – June 23, 2022 –  New research reveals how American consumers really feel about Buy Now, Pay Later (BNPL) loans affecting their credit scores and what they’re willing to do to avoid debt. 

GoCardless, a global leader in direct bank payment solutions, surveyed 1,000 US consumers aged 18 and over and found that three in 10 (30%) Americans are concerned about BNPL plans included on credit reports.

Equifax has been including BNPL payment information in credit reports since early this year in the US, citing that this move is meant to increase credit scores and help consumers build their credit profiles.

But the idea still has consumers worried. Close to a quarter (24%) say they owe a lot of money in BNPL loans and fear they won’t be able to pay them off. This is especially true for Gen Z (28%) and Millennials (27%) compared to their generational counterparts.

Not being able to pay off BNPL loans is one thing, but those defaults reflected on your credit score is another, as most concerned consumers say the initial appeal of BNPL was that it did not affect their credit score (45%).

Step #1: Control BNPL spend

This overarching concern seems to stem from consumers wanting to avoid credit score surprises and debt. And step one is finding new methods to control their BNPL spending. 

To repay their BNPL plans, 14% of consumers use credit cards, while 30% use debit cards. Of those that use a credit card, close to three quarters (72%) would switch from credit cards to ACH payments, which allows them to transfer money directly from their bank accounts to avoid accruing interest and debt. 

When asked why they would make the switch to ACH payments, consumers revealed a variety of reasons:

• It’s more secure than credit cards (49%)

• They don’t have to worry about changing their credit card information for a service when/if something happens to their credit card (41%)

• They wouldn’t rack up credit card debt with ACH (30%)

Many consumers would be open to trying new technology to better manage their BNPL plans. A previous GoCardless study found that close to half (46%) of Americans say they find it difficult to keep track of how many BNPL plans they have open. Nearly six in ten (58%) say they would need to check their accounts to determine how much money they owe instead of estimating. Eight in ten consumers would be interested in a central location, such as an app or website, to view all their open plans (80%) and pay them off (82%), regardless of provider.

Vanni Parmeggiani, Director, Open Banking & Real-Time Payments of GoCardless, said:  “The Buy Now, Pay Later craze skyrocketed during the pandemic, but the rise in popularity came with more interest from credit bureaus like Equifax to get visibility into consumers' plans. It's understandable why consumers are concerned about how these loans can impact their scores, especially with a number of them worried they can't pay off their plans. For those who can, switching from credit cards to ACH payments for your BNPL loans can be a more foolproof payment method. ACH relies on bank account information, which is less likely to change and is more secure than credit cards. This reduces the likelihood of a failed payment, fraud and the chances that a BNPL plan will harm your credit rating."