Everything You Need to Know About Buy Now Pay Later Services

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Last updated on June 22, 2021

Buy now pay later services are a popular way to pay for a purchase over an extended period of time. This allows you to get what you want without putting up all the required cash upfront.

However, before you get involved with BNPL services, you should know exactly how they work. Our expert guide answers all your questions.

What Are Buy Now Pay Later Purchases?

A buy now pay later purchase is exactly what it sounds like. You have the ability to purchase and take home an item today, without paying for it in full. This gives you the flexibility to make a purchase that may otherwise have been impossible.

Here are some additional details to help clear the air:

Can I use buy now pay later if I’m on a debt solution plan?

Before you do anything, check with your plan administrator to better understand the terms and conditions of your agreement. In most cases, using a BNPL service is against the guidelines.

Why is buy now pay later so popular?

The primary reason for the popularity is the opportunity to spread out the cost of a purchase over several weeks.

What will I be charged?

This varies from service to service. Some have fees, while others do not.

Will buy now pay later affect my credit score?

Some BNPL services report activity to one or more of the three major credit bureaus, while others do not.

Pay in installments

As noted above, a BNPL service allows you to pay for the entirety of your purchase in installments.

Pay later

With most BNPL services, you’re only required to pay 25% of the total purchase price upfront. You can then pay the remaining 75% later.

How can I keep track of my buy now pay later purchases?

Most BNPL services have an app that allows you to track your purchases, including the overall cost and how many payments you have remaining.

What happens if I miss a payment?

You can generally expect to pay a late fee if you miss a payment.

How Does Buy Now, Pay Later Work?

This is the million-dollar question. You’re interested in buy now pay later purchases, but unsure if it suits you, your purchase, and your overall financial circumstances.

While every service has its own approach, here are the basics of how the process works:

  • Choose a BNPL service based on the store you’re shopping at.
  • Complete an application to see if you qualify.
  • Compare BNPL products to ensure that you’re making an informed decision.
  • Review the terms and conditions.
  • Make your purchase.
  • Pay off the remaining balance.

The Best Buy Now, Pay Later Services

Before you make a rash decision — such as using a credit card or personal loan to make a purchase — it’s best to learn more about other consumer lending options.

As you compare buy now pay later services, you’ll find that these two are among the most highly rated:


With no late payment fees, no compounding interest, and a large network of vendors, Affirm has cemented itself as one of the top companies in the BNPL space.

While anyone can apply, a credit score of 600 or above will best position you to receive approval. Affirm uses a soft credit check to make its decision.


The ability to use the QuadPay app to make purchases in-store and online helps it stand out from the crowd.

QuadPay simplifies the process of splitting your purchase into four payments over six weeks.

With a soft credit check, QuadPay gains access to your credit score and other details it needs to make a decision on your application.

The Advantages of BNPL

There are many advantages of BNPL, including but not limited to:

Useful if you don’t have a credit card

If you don’t have a credit card or don’t want to use a credit card, a BNPL service is a top alternative.

Fast approval

Immediate application decision allows you to immediately decide if you can proceed.

Sometimes more affordable than paying upfront

For example, paying upfront with a credit card or personal loan can be more costly as a result of interest charges.

Greater flexibility and convenience

You have the flexibility to choose a payment option that suits you. Furthermore, you get the convenience of paying off your purchase over several weeks or longer.

No interest rates

There is no interest rate to quickly increase the amount that you owe.

Automatic charging

Automatic charging helps you avoid late payment fees, while also saving you time.

The Disadvantages of BNPL

Just as there are advantages of a buy now pay later service, there are some potential disadvantages:

High payment fees

Since you’re only splitting your payment into four installments, it can leave you with a large payment every two weeks.

No affordability/credit check

With no credit check or a soft credit check, you may be approved even if you shouldn’t be using this type of service. Also, there’s no affordability assessment. It’s up to you to decide if it’s a financially sound decision.

Can negatively affect future loan applications

For example, if you purchase buy now pay later products, it could negatively affect your credit score if you don’t pay on time. This can affect the ability to obtain future loan products.

When Not to Use Buy Now, Pay Later Services

The intrigue of a shop now pay later service is more than many people can handle. However, before you go down this path, you should realize there are times when this doesn’t make sense.

  • You don’t have the money to pay off the entire purchase as outlined by the agreement
  • You already have debt related to purchases you can’t afford
  • You’re not sure of which BNPL products you need — you simply want to buy something

Things to Consider About BNPL Services

Here are some additional things to consider as you compare BNPL services with the idea of making a purchase.

With BNPL you’re spreading the cost of what you buy over weeks or months

You don’t owe the entirety of the purchase price upfront. Instead, you can spread out the cost of what you buy over weeks or months.

This approach makes for smaller payments, thus allowing them to better fit into your budget.

BNPL is interest-free and fee-free

This is in stark contrast to a credit card that comes with both finance charges and potential fees.

The only drawback is that you have less time to repay the money with a BNPL service.

BNPL repayments are normally fortnightly or weekly

Most BNPL repayments are due every two weeks or every week. You may even be able to choose your payment option. A defined schedule allows you to do two things:

  • Determine if you can afford the payment
  • Understand the impact of the payment on your weekly and/or monthly budget

BNPL can be used in-store as well as online

BNPL services are not online only. Many services also offer the ability to purchase buy now pay later products in-store.

The ability to use these services in store makes BNPL a sound alternative to credit cards.

Everyone has a different spending limit

Your spending limit is based on a variety of factors, including the service you use and your credit history. Once you know your spending limit, you can decide how to best proceed.

You’re unlikely to be ‘hard’ credit checked when using BNPL

With only a soft credit check, applying for a BNPL service will not affect your credit score.

You’re able to learn more about your eligibility without any concern of damaging your credit score. This is in contrast to a credit card application which often results in a hard check.

Miss an installment and you’ll likely face late fees

If you miss an installment payment, you’re likely to be charged a late fee. However, this isn’t generally as high as with a credit card.

Many BNPL services have an auto-pay feature to help prevent this.

Any missed payments can hurt your credit score

Should your service report your payment history to one or more credit agencies, a missed payment could hurt your score.

Using auto-paying and/or setting reminders on your phone can help prevent missed payments and the resulting damage.

Buy now, pay later is to become a regulated sector

Regulations are coming to the BNPL sector in the future. As this happens, BNPL services will adjust the way they do business, which could affect the manner in which you borrow money.

A 0% credit card or overdraft might be a better way to borrow

If you have access to other options, it’s something to at least consider. Compare the pros and cons before making a final decision.

For example, a 0% credit card and a BNPL service share many of the same benefits, including the ability to borrow without any concern about finance charges.

Some BNPL products let you pay over a much longer period

Some BNPL products offer flexible credit, meaning you can pay over a much longer period of time. Adding to this, no deposit purchases may also be available.

The longer the term, the smaller your monthly payment. This may allow you to make a purchase that you otherwise wouldn’t have been able to afford.

Alternatives to Buy Now, Pay Later Schemes

If you’re not comfortable with using a buy now pay later service, another form of consumer lending may better suit you.

Cut back or save up

Rather than make a purchase today, consider if you really need the item. You could also set the goal of saving up the money you need to make the purchase.

Buy clothes second-hand

Rather than buy clothes with a BNPL service, shop at second-hand stores as a means of saving money.

Personal loans

A personal loan is generally best if you’re making a large purchase that you want to repay over several years.

Credit cards

Credit cards are most useful when you have access to a zero percent introductory offer. This allows you to carry a balance without any interest charges.

Credit unions

Contact your local credit union to discuss loans, credit cards, and any other consumer lending products available to you.

Borrowing from friends and family

If it’s a necessary purchase that you need to make, a loan from friends and/or family is an option.

Surprising Statistics About Buy Now, Pay Later Services

Even if you have some experience with buy now pay later services, these statistics may surprise you:

  • 56% of Americans have used a buy now, pay later service.
  • Over half of non-users are likely to use buy now, pay later in the next 12 months.
  • 64% of buy now, pay later users have used it more since the beginning of the pandemic.
  • Almost a third of buy now, pay later users have made a late payment or incurred a late fee.
  • 62% of buy now, pay later users think it could replace their credit cards.
  • Over 40% of buy now, pay later users have used PayPal’s BNPL services.
  • 45% of buy now, pay later users use it to make purchases that don’t fit in their budget.
  • Electronics remain the most popular use of buy now, pay later.
  • 36% of buy now, pay later users use it once a month or more.
  • Most buy now, pay later users have a single payment per month.
  • 27% of buy now, pay later users heard about it on social media.
  • 30% of buy now, pay later users trust BNPL providers more than credit card companies when it comes to fair business practices.
  • 61% of buy now, pay later users would rather use a BNPL service directly from a retailer.

Frequently Asked Questions (FAQs)

These are among the most common questions consumers ask about BNPL services.

How does buying now and paying later work?

You can shop now and pay later by using a service that allows you to pay for your purchase in installments.

Can you repay buy now, pay later schemes early?

Yes, but you’ll want to check with your provider to understand if there are any prepayment penalties.

Am I required to undergo a credit check?

There is no credit check with most services. And even if there is, it’ll only be a soft inquiry so there’s no effect on your credit score.

Does buy now pay later affect my credit score?

With a soft inquiry, applying will not affect your score. But if your service reports your activity and you miss a payment, it will show up on your credit report.

What happens if I can’t afford my repayments?

You should run an affordability assessment to help protect against this. If you still find yourself in this position, expect to pay late fees. You should also connect with your provider to learn more about your options.

Do I get reminders to make payments?

Yes. Adding to this, you can set up automatic payments so you never miss one.

What are the upsides of paying through a BNPL?

You don’t have to put up the full purchase price upfront. Also, there are no or minimal fees associated with BNPL services.

Can’t I just use my credit card though?

Yes. A credit card is an option to consider, but there are many reasons to avoid it, such as high finance charges if you carry a balance.

How do these companies make money?

BNPL services make money by providing a service to retailers.

What happens if you’re on multiple BNPL programs?

If you’re using multiple own it now pay later services, it’s important that you have a clear overview of where you stand with each one. Confusion can quickly set in.

How can I budget for extra purchases through a BNPL program?

It’s best to know what you can and can’t afford on a monthly basis. This will help you budget accordingly.

Are buy now pay later apps and services secure?

Yes. BNPL services take great pride in the safety and security of their apps.

How much do BNPL services cost?

Most BNPL services do not charge a fee to use it.

Is it a good idea to use a BNPL app to pay for online purchases?

This depends on your specific needs and financial circumstances. If you’re using an own it now pay later service because you can’t afford a luxury item, it’s probably a bad idea. But if you’re doing it because of the no deposit and no credit check requirements, it could make more sense.

Final Thoughts

The benefits of buy now pay later services outweigh any potential drawbacks. From flexible credit terms to no fees — and that’s just the start — you’re in a position to buy what you want without a large initial outlay of cash.

If this piques your interest, compare multiple BNPL services to decide which one is best.

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