NEW YORK—Consumers are flocking to buy-now, pay-later offers as online shopping surges in response to the pandemic. One major card company has responded by prohibiting cardholders from paying off those debts with its cards.
Soaring unemployment has left struggling consumers looking for ways to pay without busting their budgets, reported Bloomberg.
That — along with the fact the coronavirus pandemic has pushed many shoppers online — has prompted a surge in interest in options that let consumers split up their purchases into smaller payments.
“Afterpay and its rivals—brands like Klarna and Sezzle and Quadpay—are now featured across thousands of merchants’ websites, with small ads popping up as consumers check out, encouraging them to pay off their purchases in installments,” Bloomberg said.
In response, McClean, Va.-based Capital One has barred customers using its credit cards to clear buy-now-pay-later debt, as the transactions bear unacceptable risk, it told Reuters.
The move makes Capital One the first to distance itself from the new financing alternative, Reuters said.
The third-largest U.S. card firm with 62 million accounts, plus more in Canada and Britain, said it would no longer allow “transactions identified as point of sale loans charged on its credit cards, regardless of the point of sale lender.”