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Buy Now, Pay Later: Transforming Consumer Credit and Shopping Habits

Buy Now, Pay Later: Transforming Consumer Credit and Shopping Habits

The "buy now, pay later" (BNPL) payment model is rapidly gaining popularity among consumers as a compelling alternative to traditional credit. This short-term, interest-free credit option is available both online and in physical stores. Historically, BNPL providers have not reported user information to credit agencies, which has implications for borrowers who aim to build credit through timely payments. A recent survey by TransUnion revealed that 80% of consumers using BNPL do so more than once a year. In response, TransUnion is working to ensure these transactions are reported to credit agencies, reflecting positive borrowing behavior without penalizing frequent users. Liz Pagel, senior vice president for Consumer Lending, highlighted that more data is required to determine the full impact of BNPL on credit scores. However, she noted that it could be an effective tool for building credit history if payments are made on time. The most popular BNPL option allows consumers to pay 25% in four installments at 0% interest.

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