Chase Blocks Credit Card Payments for Buy Now, Pay Later Loans

Chase to Prohibit Credit Card Payments for Buy Now, Pay Later Loans

JPMorgan Chase, recognized as the largest credit card issuer in the United States, is implementing a significant policy change that will prevent customers from utilizing their Chase credit cards to pay off increasingly popular “buy now, pay later” (BNPL) installment loans. In a recent statement, the bank clarified that these BNPL loans are considered a form of credit, and as such, they do not typically permit customers to settle other credit obligations with their Chase cards.

The new policy will take effect on October 10, and Chase has begun notifying its customers about this change. They are advising customers to link alternative payment methods to their BNPL accounts to avoid missed payments and potential late fees. However, the bank has chosen not to disclose what percentage of its cardholders currently utilize third-party BNPL services such as Affirm, Afterpay, Klarna, PayPal, and Sezzle.

Chase is not alone in this decision; it follows a similar move by Capital One, the fourth-largest card issuer in the country, which restricted the use of its credit cards for BNPL loans back in late 2020. Sarah Strauss, head of customer services and strategy at Capital One, stated in an emailed message that the bank promotes responsible debt repayment practices among its customers. She emphasized, “Our longstanding policy is that we do not allow customers to pay other forms of debt on Capital One credit cards, including buy now pay later loans.”

This policy shift at Chase comes in the wake of a recent announcement from a federal consumer watchdog agency, which aims to regulate BNPL loans in a manner similar to credit cards. Additionally, this decision is influenced by the rising delinquency rates on traditional credit cards, prompting banks to adopt a more cautious approach even as they face increasing competition from alternative pay-later lenders.

Buy now, pay later loans, often viewed as a contemporary take on traditional layaway plans, are frequently referred to as “pay in four” loans. They enable consumers to split their purchases into four payments, typically within a span of six weeks. While specific details can vary among different providers, customers usually incur no fees or interest if they adhere to the payment schedule. However, it is essential to note that some BNPL lenders may impose substantial late fees for missed payments.