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The Hidden Risks of ‘Buy Now, Pay Later’ Services

Kathryn Tuggle  |  December 21, 2021

Have you been using BNPL companies like Afterpay, Affirm, and Klarna? If you like easy returns and buyer protections, think again.

I’ll be honest. I went a little hard on Black Friday… and Cyber Monday, too. I found some bargains on things I’d been eyeing for a while, so I snagged them. But this year it wasn’t the abundant deep discounts that surprised me. (I got 40% off, at most. Sigh.) Nor was it the amount I spent (I diligently budgeted for those new Brooklinen Super Plush Bath Sheets, which are heavenly.) This year, my biggest surprise was the introduction of “Buy Now, Pay Later” (BNPL) companies to the market, and the fact that while all of my friends seem to be using them, no one seems to have any idea what they’ve actually signed up for. 

So, Here’s What Happened 

During my mini shopping spree,  I bought a giant Canada Goose coat, because I heard they are the warmest in the world, and I am very tired of being cold. The coat ended up not working out for me, not because those geese aren’t all they’re cracked up to be, but because I have freakishly long arms. So, the coat had to go back, but the box it came in had gotten pretty badly beaten up in transit, and I didn’t feel like using an entire roll of packing tape to shore it up. So, I did something that thousands of consumers do every day — I decided to take something I’d bought online, and return it to a physical store. 

The Canada Goose salesperson took pity on me as soon I walked through the door, schlepping a giant box, stuffed into an even more giant tote bag. The conversation went like this: 

Him: “Do you have a return?” 

Me: “Yes, and a new appreciation for how heavy these coats are.” 

Him: “Please tell me you didn’t use Klarna.” 

Me: “Ummm, what?” 

He proceeded to explain that if I’d used Klarna, a popular BNPL company, there would be no option for me to return the coat in-store. Instead, I’d have to take my giant package right back home, start the return process online, and mail it back. Thankfully, I’d used a good old-fashioned credit card for the transaction, so I was able to complete my return with ease, and walk home gloriously unencumbered… But as I walked, I found myself weighed down by something else: The worry that the millions of consumers who are now using BNPL have never read the fine print. 

Here’s What I Knew Already 

TBH, I didn’t know much about these programs before this holiday season, other than that they exist as a thing that lets you split your larger online purchases into smaller payments over time. It’s kind of like layaway, where you paid a little at a time towards an item you wanted, and then took it home once you paid it off, only in reverse. You get your item immediately, then pay for it in installments. 

We had covered BNPL at HerMoney before, a couple of times, with words of caution that 7 in 10 BNPL users had been charged interest or fees for missing payments. Also, we mentioned that BNPL can inspire you to spend more — customers who have the ability to “pay later” place orders that are an average of 18% larger. 

But when I dug into what it took to return something — anything — I opened a huge can of worms. 

Here’s What I Found Out: The Truth About What Happens When You Want To Return Something 

I reached out to Klarna, Afterpay and Affirm to get specifics on their return policies, and they were all quick to tell me that they don’t control store return policies — the individual retailers decide what they accept back, and how long you have to return it. I get that. 

But here’s the tricky thing: It’s up to the individual retailer to decide how BNPL-financed purchases must be returned, and almost every single retailer wants something different from you. Some require you to start your return via the BNPL company’s online portal. At Canada Goose, for example, the return policy clearly states that online orders placed with Klarna cannot be returned in-store. The same goes for Ralph Lauren, and for Afterpay users, Michael Kors. Other retailers, like Macy’s, allow you to start your return in-store, but then you’ll need to check your Klarna app to verify that you were refunded. 

Bed Bath and Beyond allows Afterpay customers to return something via mail, or in-store, but if you go in-store, you’ll need to have your Afterpay app with you, and launch your Afterpay card when you get to the register. And other retailers won’t EVER cancel your BNPL payments — but they will give you your purchase price back, onto a debit or credit card of your choosing. For example, if you need a refund at Sephora, your Klarna payment never goes away. Instead, Sephora will let you choose which one of your credit or debit cards they should refund, while you continue making all your Klarna payments until the bill is fully paid. 

I feel like I barely scratched the surface with this, and came up with different instructions for every major retailer I found. The point is this: If a BNPL customer needed to return something at, say, 10 different retailers, it’s reasonable to expect that every single return process could look different. And even if you managed to make it through all those returns successfully, it would be so easy to lose track of a credit that was supposed to come through on a given app or credit card. 

“Returns are a major pain point of Buy Now, Pay Later. Any time a middleman is involved, it seems like things get more complicated, explains Ted Rossman, Senior Industry Analyst for “This reminds me of changing your travel plans if you booked through an online travel agency — you usually have to go through Expedia, Orbitz, Travelocity, etc. rather than dealing with the airline directly,” he says, a process that I can attest is incredibly frustrating. “These companies often don’t go out of their way to make it smooth or easy.”  

And let’s say you change your mind about a return you want to make — for example, if you decide to return more, or fewer, items than you originally reported you were sending back. Klarna’s rules are clear: “It’s not possible to change the information submitted after reporting the return to us.” They advise informing the store directly “as only they can update your payment plan.” But most retailers’ return policies refer customers back to the BNPL companies for all questions or concerns… It’s easy to see how a shopper could feel trapped in an endless loop of uncertainty here, and decide it’s simply more trouble than it’s worth to try and return anything. 

Perhaps The Worst Of All: Loss Of Buyer Protections 

And then there’s this. If you use BNPL, you can say goodbye to dispute protections that you may have come to expect from your credit card. Anyone who has a credit card in their name has an important benefit that comes with it — the ability to dispute a charge that you disagree with. You might want to dispute a charge if, for example, you feel that the quality of an item wasn’t what you were promised, or if the goods or services you bought were never delivered to you. (When you start a dispute, the credit card company can reverse the charge, giving you your money back, which then forces the merchant’s hand to make good on their promises to you, whatever they were.) But when you use BNPL services, you’re completely stripping yourself of those rights, explains Joe Lynyak, Partner at the law firm of Dorsey & Whitney and an expert on the Consumer Financial Protection Bureau and regulatory reform. 

“The right to dispute a charge is perhaps one of the strongest consumer protections there is, but it does not apply for BNPL purchases — these purchases are outside of federal consumer law protections. BNPL companies offer a credit-like product that can have whatever terms and conditions their company wants to impose,” Lynayak says. The BNPL company has “no obligation or skin in the game” to get in the middle of a dispute, Lynyak explains. “This is why the best way to purchase something expensive is to use a credit card so you have leverage in the case of a dispute.”

The Real Deal + The Future of BNPL 

I asked Afterpay, Affirm and Klarna for information on the number of returns they see from their customers, and how that compares to the number of returns done by a normal credit-card user. I wanted to see if, in fact, these hurdles have inspired BNPL users to just give up on returning things, and just eat the cost. Afterpay confirmed that although they do not track return data, they hear from merchants that there are lower returns when goods are purchased through Afterpay. Affirm and Klarna said they did not have any data on this topic — but hopefully, that’s all about to change. Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued a series of orders to the BNPL companies we’ve featured in this story, requiring them to compile an overview of the risks and benefits of using their services. “I’m hopeful that the CFPB’s digging into BNPL will lead to more streamlined return and dispute processes,” Rossman says. We hope to see some real numbers on this in 2022, and we will absolutely update you when we do.

So, What Do We Do From Here? 

The truth is, BNPL isn’t going anywhere anytime soon. Why? The retailers that have contracted with these companies want you to spend more (see that aforementioned 18%). And they also want you to return less. 

So, what’s a consumer to do? 

Use your credit card for purchases if you’re able to pay it off every month, and enjoy racking up the rewards points or miles on that card. “Credit cards are the gold standard in terms of disputes and buyer protections,” Rossman says. “And credit cards often offer helpful add-ons such as extended warranty coverage and purchase protection at no extra cost, bailing you out if something breaks or is stolen.” 

Or, use your ATM/bank card, and pay for your purchase with money that’s already sitting in your account. And if you just don’t have the money for something non-essential right now, as much as it may hurt to hear: Don’t buy it. 

And, for all that stuff in-between? We’re talking about true needs that you really can’t afford to pay for in a single billing cycle — like that refrigerator which is suddenly unfixable. Put those bills on the lowest interest rate card in your wallet, then do your best to pay them off ASAP. With these big purchases, having the protections of the credit card companies at your back is all the more important.

Where To Go For Full BNPL Return Policy Details  


You can view their complete return policy here, and their return FAQ.


You can view their FAQ page for more information regarding online returns and refunds or for in-store returns and refunds


You can see their details on order issues and refunds here, and how to get refunds for paid interest


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