Is Buy Now, Pay Later a Good Option?

By Marni Gasser, Director of Card Programs 

No matter what you’re shopping for, you may have noticed the option to Buy Now, Pay Later (BNPL) for purchases with companies like Affirm, Afterpay, Klarna or PayPal. 

What exactly is BNPL, and is it the right choice for you?  

What is Buy Now, Pay Later (BNPL)? 

BNPL enables shoppers to fund purchases with debt and pay them off over time – typically in four installments or less, often with a down payment of 25% due at checkout. 

BNPL is a form of borrowing, like a credit card. 

Should I use BNPL instead of a credit card?

It depends on your situation, but here are some important things to consider when deciding between BNPL or a credit card for purchases: 

• Building credit is questionable: Unfortunately, most BNPL activity is not reported to credit bureaus — unless you miss a payment, and then that negative activity could impact your credit score. If you’re hoping to establish or build credit, a credit card is a better option. 
• Lacking consumer protections: True, credit cards may come with more strings attached, but they’re also more heavily regulated. If you purchase something using BNPL that turns out to be faulty or a scam, you may not have the same dispute protections you would if you made that purchase with a credit card.  
• Returns could be a headache: Returns on merchandise purchased via BNPL can be complicated – you may still be on the hook for the total cost of the product until the return dispute is resolved. Make sure you fully understand both the BNPL loan terms and any seller’s return policies before making a BNPL purchase. 
• Debt accumulation and fees: Racking up BNPL purchases is a quick way to wind up in debt. Many consumers don’t think about BNPL as debt, but you’re still required to pay what you owe for the purchases you made. Plus, most BNPL providers will assess late fees if you miss a payment. 
• Slippery slope to spending sprees: Using BNPL can lead you to buy more. In fact, apart from providing a convenient payment method to shoppers, retailers depend on BNPL leading to more consumer spending sprees.

When should I use BNPL?

BNPL could be an option if you’re unable to open a credit card account.  

BNPL is often accessible regardless of your personal credit history if you provide the lender your name, email, mobile number, date of birth (users must be 18), and bank account.  

Another benefit is most BNPL approvals don’t require a hard credit pull – with possible exceptions for especially large purchases. 

And many BNPL purchases can be made interest-free, meaning the price you pay for your purchases won’t exceed the actual price of your items. Just remember to spend within your means, because you will be charged late fees if you’re unable to make your payments on time. 

BNPL can be a helpful tool if you have limited access to credit and want to make a bigger purchase or your cash flow is tight. Think twice before using it for smaller, one-offs. And always make sure your budget allows for any purchases you make with BNPL.

This article is provided for informational purposes only. The content is intended to offer general information on the subject matter and should not be considered professional advice, legal counsel, or financial guidance.