Capital One Reviews Buy Now, Pay Later Options

The bank has determined BNPL transactions are too "risky"

Need to Know

  • Capital One has become the first major bank to bar customers from using buy now, pay later financing using its credit cards.
  • The bank has decided that BNPL loans “can be risky for customers and the banks that serve them” due to tighter regulatory scrutiny.
  • Capital One’s decision will not affect customers who choose BNPL financing when making purchases with debit cards or using checking accounts.
  • The decision comes as BNPL firms such as Afterpay and Klarna skyrocket in popularity.


Capital One has halted buy now, pay later financing for customers who use the bank’s credit cards.

The move makes Capital One Financial Corp. the first bank to push back against BNPL financing, which has grown steadily in popularity during the COVID-19 pandemic. The company said in a statement that it would no longer allow “transactions identified as point of sale loans charged on its credit cards, regardless of the point of sale lender.”

In the statement, Capital One added that it has determined that BNPL transactions “transactions can be risky for customers and the banks that serve them” due to a relative lack of regulatory scrutiny. BNPL transactions, which typically require customers to pay back purchases in four interest-free installments, are not subject to background financial checks and are exempt from consumer credit law in most countries. In other words, both customers and financial institutions are susceptible to the impacts of unregulated debt-collection practices.

Capital One will continue to allow customers to use buy now, pay later financing on purchases made with debit cards, or via checking accounts.

The use of BNPL payments has spiked in popularity during the COVID-19 pandemic, as consumers look for more flexible financing options—and vendors seek to satisfy this need. According to a recent survey by the Bank of America, these services can expect to “grow 10-15x by 2025, to eventually process $650 billion to $1 trillion in transactions.” Major retailers including Gap, Target and Macy’s have all introduced buy now, pay later integration in 2020, partnering with industry leaders such as Sezzle and Klarna.

Banks, fintechs, and other financial institutions, too, have adopted their own BNPL tech: PayPal, for instance, rolled out buy now, pay later functionality in August, while Citi partnered with Amazon to launch financing on Amazon purchases of $100 or more in the same month. Afterpay is the only BNPL company to have issued a statement on the Capital One decision, saying that the decision would only affect a “small percentage of Afterpay customers and many of those have chosen to add a different card in their Afterpay wallet.”