What Is Buy Now Pay Later & Is It a Good Idea?

 Buy now and pay later is taking the market by storm, but will you be taken to the cleaners if you indulge in this online purchasing craze?

 That’s all up to you.

BNPL is like using a credit card or getting a loan. But unlike credit cards, there is light at the end of the payment tunnel.

Purchases are paid in installments over the course of a few weeks or months. And unlike credit cards, it’s interest free.

So what’s the catch?

There really isn’t one, as long as you make your payments on time. The problem is millions of Americans have a hard time doing that.

If you’re one of them, BNPL is just another service that encourages you to buy things you can’t afford and probably don’t even need. That sort of decision making always comes with a price.

How Buy Now Pay Later Works

It’s weird, but imagine your credit card and debit card got together and gave birth to a hybrid card.

BNPL companies team with merchants to offer an installment option when you check out. It’s usually 2-to-4 payments that are automatically withdrawn from your debit card account, though you can use a credit card under some plans.

When you check out, you give the BNPL company your name, address, phone number and birth date. Instead of a traditional credit check, you are approved or rejected based on an algorithm.

Companies don’t divulge what criteria goes into their algorithms, but like credit cards, they want your business, so the algorithm probably will give you the benefit of any payoff doubt.

You essentially get a mini-loan. It’s quick, simple, tempting and makes immediate financial sense. Unlike credit cards, the retailer picks up the processing fees instead of the consumer.

What’s in it for Walmart, Macy’s, Sephora and thousands of other retailers? BNPL customers usually buy more stuff.

The process has actually been around for about 15 years, but it’s really caught fire since the Covid shutdown. Online sales skyrocketed but consumers have shied away from using credit cards. The average credit card debt was $5,075 in the third quarter of 2020, down 10% from that period in 2019.

People are worried about debt, and they see BNPLs as an ideal way to buy something without paying 18% interest rates. That’s why companies like Klarna, Affirm and AfterPay now dream of becoming Visa, Mastercard and Discover.

Klarna doubled its business in 2020 and has a consumer base of 11 million. Afterpay had $2 billion in global sales last November. Affirm’s business was also up about 100% in 2020.

It’s a win for BNPLs. It’s a win for retailers. But is it really a win for consumers?

Is Buy Now Pay Later a Good Idea?

BNPLs are no worse than any other product that helps people spend money they don’t have. They are certainly better than payday loans or credit cards with interest rates over 25%.

But like all those services, they try to remove the anxiety that forces people to tap the brakes and ask, ‘Can I really afford this?” Instead, they just speed on through to buy something that looks marvelous in the moment – and cheaper!

Four payments of $90 for a Series 6 Apple Watch doesn’t feel like you’re spending the $360 it actually cost. You feel more like a thrifty Clark Howard than a sucker. It’s a marketing sweet spot that has made QVC a sales Goliath.

Almost two-thirds of BNPL users say they buy jewelry and other “want” items they’d otherwise avoid, according to a survey by the consumer data tracking firm Cardify. Nearly half of BNPL users say they spend between 10% and 40% more than they would if they were using a credit card.

But like credit cards, the bills eventually come due. Unlike credit cards, you can’t kick that can down the road very far.

Some BNPLs automatically charge your debit card or credit card when your payment is due. They can also charge late fees and report the late payments to credit bureaus.

According to an Ascent study, only 22% of consumers understand all of the terms and conditions of a BNPL plan. You have to read the fine print.

But more than anything, you have to avoid impulsively buying something you really cannot afford.

Buy Now Pay Later Apps

Here’s a list of the most popular BNPL apps and their plans.

  • Klarna – Installments are paid every two weeks. It also offers a flexible payment schedule that can give you up to three years to pay off the debt.
  • Afterpay – Installments every two weeks.
  • Sezzle – Pay the first installment at the time of purchase, then pay the balance in three installments over the next six weeks.
  • Quad Pay – Pay the first installment at the time of purchase and the rest is charged every two weeks.
  • PayPal Credit – For purchases under $99, you can pay it off over time in monthly installments. For purchases over $99, interest will be charged if they aren’t paid off in six months. And the interest rate is 23.99%.
  • Affirm – It offers payment plans ranging from three months to three years. There are no late fees, but interest charges are up to a whopping 30%.
  • Splitit – Installments are taken from your credit card or debit card, though the maximum purchase through a debit card is $400.
  • Zip Pay – You can choose monthly or bi-monthly payments, with a minimum required payment of $40. There’s a $6 monthly fee for the duration of the payoff.
  • Zebit – It gives you up to a $2,500 credit line. You make a down payment at the time of purchase and the balance is paid over the next six months.
  • Perpay – You fill out a questionnaire and are given a spending limit up to $2,500. Pay periods are based on factors like total debt and account history.

There are more BNPL companies popping up every day, each with an app that makes purchasing seem easy and painless.

It’s definitely easier to buy things using a BNPL. It’s also painless – at first.

If you want it to stay that way, remember what BNPL stands for. Buy Now is a great lure.

Just be sure you really can Pay Later.

Tom Jackson focuses on writing about debt solutions for consumers struggling to make ends meet. His background includes time as a columnist for newspapers in Washington D.C., Tampa and Sacramento, Calif., where he reported and commented on everything from city and state budgets to the marketing of local businesses and how the business of professional sports impacts a city. Along the way, he has racked up state and national awards for writing, editing and design. Tom’s blogging on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.

Woman carrying shopping bags using her phone to buy items now and pay later


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    1. Cheng, A. (2020,  December 16) Why Retailers Are Embracing ‘Buy Now, Pay Later’ Services This Holiday Season. Retrieved from https://www.forbes.com/sites/andriacheng/2020/12/16/why-retailers-are-embracing-buy-now-pay-later-service-this-holiday-season/?sh=465c5b1639c8
    2. Grant, T. (2021, January 2) Buy now, pay later is catching on in the U.S. Retrieved from https://www.startribune.com/buy-now-pay-later-is-catching-on-in-the-u-s/600006027/
    3. N.A. (2020, December 20) ‘Buy now, pay later’ services: Here’s how they work. Retrieved from https://www.winknews.com/2020/12/10/buy-now-pay-later-services-heres-how-they-work/
    4. Backman, M (2020, July 20) Study: Buy Now, Pay Later Services Growing Quickly Among U.S. Consumers. Retrieved from https://www.fool.com/the-ascent/research/buy-now-pay-later-statistics/