The mega bank has been informing users that it soon will no longer allow them to use their credit cards to make payments to third-party businesses offering “Buy Now, Pay Later” installment plans.
Effective October 10, 2024, Chase credit cards no longer will be able to pay for “Buy Now, Pay Later” installment plans.
This means installment payments to businesses like Klarna and AfterPay will be declined from October 10 moving forward. Chase is giving a few months heads up so that you can make the appropriate changes to your installment payment method.
Team Clark was able to confirm the following message went out to impacted Chase cardholders on July billing statements:
Why Is Chase Eliminating Third-Party “Buy Now, Pay Later” Installment Payments?
You may find it odd that Chase has reversed course on allowing cardholders to use their credit cards for this type of transaction.
What has changed? Is Chase actually trying to help safeguard consumers?
The answer is likely as simple as this: Chase has its own "Buy Now, Pay Later" product called Chase Pay Over TimeSM. And they'd rather cardholders use it than the offerings from the competition.
This product, which was formerly known as “Chase My Plan,” allows cardholders to make purchases, break them into equal installment payments (for a fee), and still earn credit card rewards.
Should You Be Using These Installment Payment Plans, Anyway?
Money expert Clark Howard has long discouraged the usage of “Buy Now, Pay Later” plans.
We generally recommend that you stay away from getting involved in this industry. And we definitely advise against using a credit card to make the payments on one of these installment loans. That's using one form of credit to pay for another form of credit!
Team Clark's Christopher Smith spoke with Clark about the dangers of the BNPL products on the market.
Here are the biggest downsides to the “buy now, pay later” industry as written in that article:
- Risks hurting your credit. Depending on which BNPL company you use, a single late payment can generate a negative report that gets sent to a major credit bureau. Because most BNPL companies don't default to automated payments, it's easier than it should be to miss a payment deadline.
- Potential for high interest. In some cases, BNPL companies will charge you more interest than the average credit card.
- Late fees. It's fairly common for BNPL companies to charge up to 25% of your payment in late fees.
- Spending money unwisely. Clark's biggest worry when it comes to "buy now, pay later" is overspending. He says the ability to walk out of a store without paying for an item right away encourages people to buy things they wouldn't otherwise while still creating a financial obligation.
- Complicates your financial life. We're all busy. Do you really want to add complexity to your life? For example, you can buy an $80 pair of shoes. Or you can finance it through a "buy now, pay later" service. Then you'll need to remember three $20 payments every two weeks or else risk hurting your credit, paying late fees and paying interest.
Will this change impact your credit card usage? We’d love to hear your thoughts in the Clark.com community.
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