Buy Now, Pay Later: What Is It + 9 Best Known BNPL Companies

When waiting isn’t an option and you need to purchase something right now, a buy now, pay later plan could be a good alternative to a credit card. These plans are easy to qualify for and generally more affordable than other financing options.

But, as with any form of financing, buy now, pay later has its pros and cons. Before signing up for one, here’s everything you need to know about how they work.

What is Buy Now Pay Later?

Buy now, pay later (BNPL) plans are sometimes called “pay-in-four” or “point-of-sale” personal loans. They’re similar to layaway plans in many ways. The main difference is that you get the item right away at checkout rather than having to wait for it.

With BNPL, you essentially take out a short-term installment loan with a bi-weekly repayment schedule. This makes these plans similar to QVC’s longtime “Easy Pay” program, which lets you take your purchase home now and make monthly installment payments until it’s paid off.

Many large online retailers accept these plans, but so do some brick-and-mortar stores. They’ve become so mainstream that you can even use them on small purchases, like spreading out the payments for your $15 Chipotle or UberEats lunch over a six-week timetable.

Some examples of when and where BNPL could come in handy include:

  • Planning and paying for a vacation on Expedia or another online travel site
  • Purchase apparel or shoes at such retailers as Nike
  • Shopping for household goods or furniture at Pottery Barn
  • Buying holiday gifts online

With a BNPL, you pay an initial deposit at checkout and then make three more payments every two weeks until the item is repaid. This usually takes six weeks.

Most of these plans come with interest-free payments. However, some charge interest on major purchases or those financed over a longer period. Payments are also typically deducted automatically from your bank account through a debit card or charged directly to your credit card.

These short-term loans are considered a convenient, easy alternative to credit cards. Because of their ease of use, they’ve become increasingly popular, especially since the start of the pandemic. According to a recent survey, Americans use these plans for a variety of reasons, including:

  • Technology: 35.76%
  • Household goods or furniture: 29.76%
  • Apparel: 26.77%
  • Holiday shopping: 17.13%
  • Vehicle repairs and parts: 10.28%
  • Groceries or dining out: 5.14%

9 Top Buy Now Pay Later providers

If you’re looking for the best buy now, pay later providers, here are the best ones:

Paypal Pay in 4

Available online and through an app, Paypal Pay in 4 makes it easy to make purchases at millions of online retailers. This service is backed by Paypal and is highly rated.

  • Interest charged: None
  • Other fees: No late fees or hidden fees
  • Maximum amount range: $30 to $1,500
  • Major retailers: Best Buy, Bose, Fossil, Bed Bath & Beyond, Aldo, Champion, Target, and others
  • App store ratings: 4.8 stars on the Apple App Store and 4.4 stars on the Google Play Store
  • Credit score impact: None
  • Limitations: Can’t be used for subscriptions
  • Availability: Not available to residents of Missouri, New Mexico, Nevada, Wisconsin, North Dakota, or any U.S. territories
  • Worth mentioning: It comes with the same buyer protection you’d get from using Paypal

Klarna

Klarna is a fintech company based in Sweden that offers BNPL at online and storefront locations. It also provides direct payments and post-purchase payments.

  • Interest charged: None
  • Other fees: There is a $7 late fee, as well as a returned payment fee of up to $27 for insufficient funds. One late payment could get you banned from using the service in the future. If you default on payments, the debt could end up in collections.
  • Maximum amount range: No defined spending limit. However, the more you use Klarna, the higher your purchasing power.
  • Major retailers: H&M, Etsy, Bed Bath & Beyond, Macy’s, Foot Locker, Lululemon, Adidas, BOSE, Apex Gaming PCs, Gamestop, and more
  • App store ratings: 4.8 on the Apple App Store and 4.6 on Google Play
  • Credit score impact: None
  • Availability: Can be used via the Klarna app, on their site, through a browser extension, or wherever Visa is accepted
  • Worth mentioning: Inviting friends to sign up could earn you up to $300 in Amazon gift cards. The friend also gets $30. Klarna also has a rewards club

Afterpay

Afterpay is another BNPL service that’s committed to making shopping easy, convenient, and affordable.

  • Interest charged: None
  • Other fees: Late fees are capped at 25% of the purchase. Unsuccessfully processed payments also come with an undisclosed fee
  • Maximum amount range: Starts at $500 and increases with responsible spending and on-time payments
  • Major retailers: Hundreds of merchants, including PetSmart, Urban Outfitters, Ulta Beauty, Skechers, Nordstrom, and many other clothing brands
  • Online ratings: 4.8 on the Google Play Store, 4.9 on the Apple App Store, and 4.9 on Trustpilot
  • Credit score impact: None
  • Availability: US, Canada, Australia, the UK, New Zealand, and the EU (called Clearpay)
  • Worth mentioning: Users can pay with Google Pay, Apple Pay, or Samsung Pay. Afterpay does not have revolving debt, meaning there’s no debt trap. However, one late payment prevents users from using the service until they catch up

Affirm

One of the leading BNPL services, Affirm is available as an app and as a browser extension. The company also lets users choose different payment options.

  • Interest charged: Depends on the payment plan. There’s 0% interest on the standard 4-payment plan. However, there’s 15% interest on the 6-month and 12-month plans. Interest fees can be as high as 30%, depending on credit score.
  • Other fees: No late, prepayment, annual, or opening/closing fees
  • Maximum amount range: Up to $17,500
  • Major retailers: Adidas, Kay Jewelers, Audi Service and Parts, Dyson, Ring, and Reebok
  • App store ratings: 4.6 on the Google
  • App Store and 4.9 on the Apple App Store
  • Credit score impact: None
  • Worth mentioning: There are multiple participating retailers, but you can also use the app at many merchants that don’t directly use Affirm. Users can also get an Affirm Debit+ Card for easy use

Zip

Formerly known as Quadpay, Zip gives users the flexibility and freedom to shop nearly anywhere using their app or a Google Chrome extension. Zip has also reached an agreement to acquire Sezzle, and the two are expected to merge in late 2022.

  • Interest charged: None, but there is a $1 installment fee
  • Other fees: There’s a $7 late fee, though it’s possible to waive it
  • Maximum amount range: The spending limit caps out at $1,000. However, every transaction is reviewed for approval. Spending power is also based on the user’s repayment history and how long they’ve had the app
  • Major retailers: Amazon, Walmart, Target, Nordstrom, Victoria’s Secret, Uber Eats, and more
  • Online ratings: 4.4 on Google Play, 4.9 on Apple App, and 4.6 on Trustpilot
  • Credit score impact: No hard inquiry
  • Worth mentioning: Certain brands, such as Windsor, Magnetic Me, and Psycho Bunny, work exclusively with Zip.

QuadPay

Zip acquired QuadPay in August 2020. Any users who had a QuadPay account were migrated over to the new system.

Sezzle

Sezzle is a pay-in-4 service that consumers can use for most of their online shopping needs, ranging from apparel to home goods to electronics. The company also works with various wholesale merchants. Sezzle and Zip are expected to merge in late 2022 but for now, Sezzle has its own terms.

  • Interest charged: None
  • Other fees: There are no upfront or hidden fees. However, rescheduling a payment more than once may result in a fee. Failed payments also come with a fee, but there’s a grace period of 2 to 15 days.
  • Maximum amount range: It depends on the user and will show up when you set up an account. The spending limit can increase over time.
  • Major retailers: Crunchyroll, Mission, Canada Weather Gear, Sportsman’s Guide, Bass Pro Shops, and many others
  • App store ratings: 4.7 on Google Play and 4.9 on the Apple App Store
  • Credit score impact: None
  • Worth mentioning: Sezzle offers instant approval and is available at 47,000 stores. It also lets users reschedule their payment once for free

Apple Card Monthly Installments

Apple Card Monthly Installments lets consumers use the Apple Card to purchase any new Apple products over time.

  • Interest charged: None
  • Other fees: No annual, late, or foreign transaction fees
  • Maximum amount range: Depends on the user’s credit score
  • Major retailers: It works with Apple products. You can use the cashback rewards at Exxon, Panera Bread, T-Mobile, Walgreens, and Nike
  • Online ratings: It has 3 out of 5 stars on The Balance
  • Credit score impact: None
  • Worth mentioning: It comes with up to 3% cashback on every purchase. When used at retailers that don’t accept Apple Pay, you can still get 1% cashback. You can also see your monthly installment history on their app

Google Pay

Google Pay and Afterpay have partnered together to offer buy now, pay later to people shopping online and in person. This service is also available through Google Store financing and Verizon.

  • Interest charged: None during the introductory promotional period
  • Other fees: No annual fee and no interest if the balance is paid in full on time.
  • Maximum amount range: Credit limit based on consumer eligibility
  • Major retailers: Most major U.S. retailers, including Verizon
  • Credit score impact: None
  • Worth mentioning: This company offers zero fraud liability. It also offers longer repayment periods up to 24 months, making it ideal for technology and electronic purchases. It’s also possible to finance a phone through Verizon as an existing customer. Besides this, there is 6-month special financing for non-phone purchases of $149+. There is also 12-month special financing for non-phone purchases of $299+

Visa Installments

Visa Installments’ goal is to make BNPL more available to consumers, banks, and merchants around the world. It’s still under development but has launched a pilot program.

  • Interest charged: Undisclosed
  • Other fees: Undisclosed
  • Maximum amount range: The spending limit is based on the user’s existing credit limit. Purchases go against the available credit limit
  • Major retailers: There are currently only four retailers — The Room Place, Tire Agent, Awara, and 42nd St. Photo
  • Credit score impact: It doesn’t require a credit check since it’s available to those with an existing Visa card
  • Worth mentioning: It’s still in the early stages and has limited availability. The three payment models are pre-purchase (select installments before purchase), during purchase (pay with installments), and post-purchase (can convert a prior transaction into installments)

Other recognizable BNPL names

There are plenty of other BNPL options as well, including Four, Splitit, Perpay and Amazon’s own in-house option.

How does Buy Now Pay Later work?

Buy now, pay later is a type of short-term installment loan that works similar to layaway programs.

With BNPL, you need to make an initial payment – called a deposit – at checkout. Every two weeks after that, you’ll see an automatic deduction from your bank account or credit card. This continues until the entire item is paid off, which usually takes 6 weeks.

Here’s an example.

If you purchase a new monitor for $500, you’ll be charged $125 at checkout or 25%. You’ll then get to go home with your purchase. Every two weeks, you’ll be charged another $125 for a total of four payments or six weeks. At that point, the balance due will be $0.

Most BNPL plans don’t have interest, but some lenders charge an annual percentage rate (APR) up to 30%. This is higher than the average credit card APR of 16.26%. Some plans also come with late fees ranging from $7 or $8 up to 25% of the purchased item amount.

Finally, many buy now, pay later plans do not have a maximum spending limit. This means you could use one to finance something as small as a $25 UberEats purchase. Then, you could use another one to buy a $5,000+ workstation.

Risks of BNPL services

The Consumer Financial Protection Bureau (CFPB) has recently launched an inquiry into the risks of BNPL services. The most common issues are:

  • Consumers who use these plans could be banned from making future purchases at that specific store until they catch up on any late payments
  • Even without interest, late fees quickly add up
  • Due to automatic withdrawals, bank overdraft fees are a common issue
  • Defaulting on a BNPL plan could result in any unpaid accounts being sent to collections
  • Buy now, pay later comes with few consumer protections, especially compared to traditional loans
  • It’s easy to overspend and fall into debt with these plans
  • Some BNPL companies don’t disclose the terms and conditions of their service
  • Consumer data may be used in behavioral targeting and advertising

Can BNPL plans hurt your credit?

Signing up for a buy now, pay later plan doesn’t require a hard credit inquiry, so it won’t directly hurt your credit.

However, most companies run a soft credit check and report any late or missed payments to the credit bureaus, and those will end up on your credit report. Even one missed payment can affect your credit history for up to seven years. Also, if you default on payments, the debt could end up in collections. This will also hurt your credit score for years to come.

Besides that, these plans count as loans, so they can raise your debt-to-income (DTI) ratio. The higher the DTI ratio, the greater the potential impact on your credit score.

Finally, you receive certain consumer protections with a traditional credit card, such as safeguards against fraud. With a BNPL plan, these protections are limited. If, for example, you end up the victim of fraudulent charges, you could be liable for them.

Advantages of BNPL

Here are the main advantages of using a BNPL plan:

  • Can be used for one-time purchases or big-ticket items such as technology, furniture, or home goods
  • Most come with 0% APR or interest charges
  • Items typically come with some kind of purchase protection
  • Plans are easy to qualify for as there’s no credit check
  • Delayed payments can make it easier to fund a necessary purchase
  • They’re fast and convenient
  • There are no hidden or late fees as long as you pay on time
  • Some platforms, like Affirm, offer longer repayment terms (6 or 12 months) but have interest applied
  • Some plans come with promotional offers like a free first or final payment

Disadvantages of BNPL

Before signing up for a BNPL plan, here are some of the biggest disadvantages:

  • Purchase protection is limited or tricky since users have to navigate through the merchant’s and lender’s policies
  • Some come with hidden interest or high late fees that add up
  • It’s easy to overspend or fall further into debt
  • Taking on multiple BNPL plans at once could become financially overwhelming and increase the risk of defaulting on payments
  • Some platforms don’t indicate what your spending limit is until after approval
  • It’s sometimes tricky to keep up with payments, especially if you had trouble affording the item in the first place

Is Buy Now, Pay Later a good option for you? To learn more about the risks involved, watch this video:

Before you commit to a BNPL plan

According to a DebtHammer survey, around 30% of all people who use BNPL struggle to make their payments. Before you commit to one, here’s what you should do.

Read the fine print

Always read the fine print in the terms and conditions, even if they’re dense or lack clarity. Otherwise, you could end up with surprise late fees, hidden interest, or other issues.

This information isn’t always readily available at the checkout stand. So, go to the BNPL company’s main website and familiarize yourself with the rules of that specific merchant or lender in advance.

Check if there are any consequences to defaulting on payments. Also, see what kinds of consumer protections or return policies they offer.

Review your budget

Look over your budget to make sure you have the money to make payments on time. If you don’t, or if you’re not sure, skip the BNPL for now. Otherwise, you could end up defaulting on the plan or ending up with bigger financial issues down the line.

Establish a repayment plan

Buy now, pay later plans typically require bi-weekly or monthly payments. Before signing up, make sure you know the exact terms, due dates, and amounts of each payment. That way, you can reduce the risk of defaulting or ending up with overdraft fees.

The bottom line

Buy now, pay later plans are a convenient, simple short-term loan that can be used to pay for anything from technology to a quick meal. However, many people who use them wouldn’t be able to afford their purchases otherwise.

Before signing up for BNPL, ask yourself how important the item is and if it can wait. If it can’t wait, review your budget and make sure you can afford the bi-weekly payments. Also, read the fine print so you’re aware of the exact terms and conditions of the plan.

FAQs

Does Walmart offer Buy Now Pay Later?

but can be used for anything from electronics to home goods. Payment plans vary from 3 months to 2 years. Most financed items are eligible for a refund based on Walmart’s store policy. You can make payments over at affirm.com or with the mobile app.

Can you use Buy Now Pay Later at Best Buy?

Some BNPL companies, such as Affirm and Zip, work with Best Buy.

Does Buy Now Pay Later have any hidden fees?

Some come with hidden interest, late, or transaction fees. Read the terms and conditions carefully.

What’s the difference between Buy Now Pay Later and rent-to-own?

With both, you can get something now and pay over time. Rent-to-own plans often have more flexible repayment plans than BNPL. However, these plans typically come with leasing or rental fees that make them more expensive.

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