Key takeaways
- Buy now, pay later services break your purchases into affordable chunks, often with no interest charges apply if paid on time.
- While BNPL is convenient, missed payments can trigger fees and even harm your credit.
- BNPL can be helpful for essential expenses, but overuse may lead to overspending and financial stress.
Buy now, pay later (BNPL) is essentially a type of installment loan. These services let you break the cost of a purchase into multiple equal installments. Most plans require a 25% payment at checkout, with the remaining balance due over the next few weeks.
Most BNPL services do not charge interest or mandatory fees, but the exact details depend on the provider. They are easy to use and can be more affordable than credit cards, but they can also lead to overspending if you’re not careful.
Learn more about how BNPL can be a useful financial tool when used strategically and when it’s best to avoid the service.
What is buy now, pay later?
Buy Now, Pay Later (BNPL) is a type of short-term financing that allows you to purchase items immediately and pay for them over time. Instead of paying the full price at checkout, you split your purchase into smaller, more manageable amounts spread over weeks or months. The most common BNPL plan is pay-in-four, where you pay 25% of your purchase at checkout and the rest in three equal installments over six weeks.
The majority of BNPL providers do not charge interest on pay-in-four plans, nor are there mandatory fees. This may change if you fail to pay on time.
BNPL has become increasingly popular with more retailers offering it as a payment option. While convenient, it’s important to remember that BNPL is still a form of credit. If you miss a payment, you could face late fees, restrictions on future use, or even damage to your credit score. In essence, BNPL offers convenience and flexibility, but it also carries responsibilities similar to traditional borrowing.
How do buy now, pay later services work?
BNPL plans are easy to use. At checkout, you will have to fill out a short application. The service will request information such as your name, email, date of birth, phone number, and Social Security number, as well as a payment method.
The BNPL provider will run a soft credit check – no effect on your score – to assess your ability to repay. Decisions are made almost instantly. If you are approved, they will offer you a plan. The exact plan will vary by provider, but pay-in-four is the most common.
Pay-in-four plans typically do not charge interest or have fees if you make all your payments on time. Some companies offer longer-term payment plans for larger purchases. These plans are usually for three to 60 months and come with an annual percentage rate (APR) up to 36%.
How to qualify for buy now, pay later
Qualifying for BNPL is usually easier than applying for a traditional credit card or loan. Most providers only require you to be at least 18 years old, have a valid payment method (like a debit or credit card), and a good history of paying past BNPL installments if you’ve used the service before.
Providers do consider your credit score and credit history, but they are lenient and will approve applicants with less-than-perfect credit. They are more interested in your purchase history and whether you have the funds to repay the loan. For this reason, your chosen payment method and the cost of your purchase are essential factors.
Where can you use buy now, pay later?
You can use BNPL with virtually any retailer. Major retailers, including Amazon, Walmart, and Target, have partnered with BNPL providers, letting you easily use the service online at checkout.
Some BNPL apps also feature their own shopping platforms, letting you browse participating retailers directly. Others will issue a virtual card you can add to your digital wallet to shop in-store.
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What are the fees?
One of the main appeals of BNPL is the promise of “no interest charges apply” or “zero fees” – but that only applies if you make payments on time. For many plans, as long as you follow the schedule, you won’t pay extra. If you miss a payment, providers may charge late fees up to $15 per missed installment, or a percentage of the outstanding balance. Some BNPL services also impose limits on future borrowing if you fall behind.
A few BNPL providers let you change your due date. The first rescheduled payment date is often free, while subsequent ones can cost anywhere from $2 to $7.50. Other potential fees include service fees, convenience fees, and failed payment fees.
It’s also important to note that not all BNPL offers are interest-free. Some providers offer longer-term financing (such as six to 24 months) that comes with interest charges similar to a personal loan or credit card. In these cases, the interest rate can vary widely, from as low as 0% promotional offers to over 30% APR. Before agreeing, always review the terms so you understand what you’ll owe and when.
Does buy now, pay later affect your credit?
At this moment, BNPL does not tend to impact your credit score. Most BNPL companies perform only a soft credit check when you apply, which doesn’t affect your score. In many cases, your payments also aren’t reported to the major credit bureaus, meaning on-time payments won’t help build credit.
Reporting to the credit bureaus may be changing. Some services have started automatically reporting BNPL plans. Others let you opt into programs that report payment behavior to help build credit.
Additionally, FICO announced that it would start including BNPL data into its credit scores, beginning in the fall of 2025. It is unclear how FICO will incorporate this information using its current model.
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The risks currently come if you miss payments. The BNPL provider may send unpaid balances to collections. An unpaid collection account will go on your credit report and can make borrowing more difficult in the future. In short, pay on time and use BNPL responsibly, as mismanagement can hurt your credit, and on-time payments may soon give your score a boost.
Buy now, pay later pros and cons
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Split purchases into smaller, manageable payments
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No interest (if paid on time)
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Quick and easy approval process
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Available at many major online and in-store retailers
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No hard credit check
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Improve cash flow
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Convenient payment option
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May incur fees
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High interest rate for long-term plans
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Can encourage overspending
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Limited credit-building benefits
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Missed payments may be sent to collections
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Customer service issues
Should you use buy now, pay later?
Whether buy now, pay later is a smart choice depends primarily on how you use it. If you’re disciplined, it can be a helpful way to spread out the cost of an essential purchase without paying interest. If you’re careless, it becomes risky. Let’s look at when BNPL makes sense and when it doesn’t.
When is BNPL a good idea?
BNPL can be a smart option when it helps you manage cash flow without adding unnecessary debt. Most plans are interest-free, so you can spread out payments without paying more than the purchase price.
Before using BNPL, ask yourself if the purchase is necessary. Payment plans can be worth it for big-ticket items you cannot live without, like new tires or a computer. It’s rarely a good idea to take on debt for non-essential goods.
For example, if you need to replace your washing machine, a BNPL service may make it more affordable. You can split the payments into four equal interest-free installments. Instead of paying $1,000 upfront, you pay $250 every two weeks.
It can also be a good choice if you don’t qualify for a credit card or prefer not to use one. Since BNPL often requires only a soft credit check, it’s accessible to those with limited or poor credit histories.
The key is using BNPL strategically only for purchases you truly need and when you’re confident you can keep up with payments. In these cases, it can provide flexibility without debt.
When is BNPL a bad idea?
BNPL can become a bad idea when it encourages spending beyond your means. Because approval is quick and payments seem small, it’s easy to take on multiple installment plans without realizing how much you truly owe. If you’re already carrying other debts or struggling to keep up with bills, adding BNPL payments can make your financial situation worse.
It’s also risky to use BNPL for non-essential items or luxuries you wouldn’t normally purchase. Missing payments may hurt your credit if accounts are sent to collections. Longer-term BNPL financing often has interest rates of 36% – even more expensive than credit cards – making it a poor financial choice.
In short, BNPL is best reserved for essential purchases you can repay confidently. If you’re already struggling with debt or tempted by impulse buys, it’s better to avoid it.
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Are buy now, pay later apps better than credit cards?
BNPL is another financial tool that can help you manage purchases. Whether or not they are a better choice than credit cards depends on your financial situation and how you use them.
Many providers offer interest-free plans, making it cheaper than carrying a credit card balance. Longer-term BNPL plans may be as costly as credit cards, so you will have to compare APRs.
Approval for BNPL is also simpler. Providers have lenient criteria and only a soft inquiry, which makes BNPL accessible to people with limited or poor credit. Credit card companies are more hesitant to approve borrowers with poor scores.
Credit cards, however, come with long-term benefits that BNPL usually doesn’t provide. They can help you build credit if used responsibly and offer rewards like cash back or travel points. BNPL rarely offers these perks.
In general, BNPL’s pay-in-four option may be more suitable for large essential purchases, as it allows you to avoid paying interest. Credit cards are a good way to finance everyday purchases since they enable you to build your score, but you must pay your balance in full by the end of the month.
Frequently asked questions
1. What’s the point of buy now, pay later?
BNPL gives shoppers more flexibility by breaking a purchase into smaller, manageable payments over time. It helps make big-ticket items feel affordable without requiring a credit card. For many, BNPL offers a convenient, often interest-free way to budget purchases without paying the full amount upfront.
2. Is buy now, pay later bad for credit?
BNPL isn’t automatically bad for credit, but it can become harmful if mismanaged. Most providers don’t report positive payments to credit bureaus, so it rarely helps you build credit. However, missed or late payments may be reported, sent to collections, and negatively impact your score. Responsible use won’t hurt credit, but it also won’t offer the same benefits as traditional credit cards.
3. What are the risks of BNPL?
The most significant risks of BNPL include overspending, late fees, and potential damage to your credit if you miss payments. Because it’s so easy to qualify, many consumers take on multiple installment plans, which can quickly add up. Some long-term BNPL options also carry high interest rates. Without careful budgeting, BNPL can create financial stress instead of easing it.
Bottom line
Buy now, pay later has transformed the way people shop by offering flexibility and convenience at checkout. For many, it’s an easy way to spread out costs without paying interest, making essential or big-ticket items more manageable. However, like any form of credit, it comes with responsibilities and potential pitfalls. Missed payments, hidden fees, and the temptation to overspend can turn BNPL from a helpful tool into a financial burden.
Before using BNPL, consider your overall budget and whether you can realistically commit to the repayment schedule. If managed wisely, it can be a smart alternative to credit cards for short-term purchases. But if you’re relying on it to cover non-essential spending or already juggling debt, it may do more harm than good.
Ultimately, BNPL isn’t inherently good or bad – it’s how you use it that matters. By understanding how these services work, their fees, and their impact on your credit, you can decide whether BNPL fits into your financial strategy or if traditional options, like credit cards or personal loans, may be a better choice.
