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What Is Buy Now or Pay Later?

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What Is the Difference Between Buy Now, Pay Later?

“Buy now, pay later” will divide your total purchase into equal installments and the first installment due at the time of checkout.

Updated on October 26, 2022.

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Like its name suggests, “buy now, pay later” allows you to buy something and get it immediately but pay for it later at a later time, usually over a series of installments.

While this type of payment plan has been offered for many years however, it became extremely popular during the outbreak as more people shifted to online shopping.

You can now use a buy nowand pay later plan at most major retailers, however whether you should depends on the plan you choose and your finances.

What do you want to buy now, to pay later?

Buy now and pay later, or BNPL, is a type of installment loan. It breaks your purchase down into equal installments, beginning with the first payment due at checkout. The remaining installments are charged to your credit or debit card until your purchase has been completed in full.

These plans can come with fees and interest, but some plans, depending on the provider, do not charge neither.

You’ll often find BNPL payment plans when you shop online, and many plans are also available in retail stores.

There is also and .

How does buy now, pay later for work?

During checkout, you’ll see the option to split your total purchase and pay a smaller amount now, instead of the entire balance.

If you’re interested, you’ll fill out a short application directly at the check-out screen. It may ask for information like your name, email address, date of birth, phone number and Social Security number. It will also ask for a payment method. The BNPL provider can conduct an uninvolved credit check that won’t impact your credit score. They will accept or deny your application in a matter of seconds.

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Criteria for approval differ and, despite the fact that you’re not credit-worthy or have no credit, you may still be qualified.

The payment plan you’re offered may also vary by provider Many companies employ a “pay-in-four” method, which breaks down your purchase into four equal installments, to be paid two weeks after the other, with the first payment due right away.

For example, if your total purchase of $300 is $30, have to pay $75 at the point of purchase, and there are three more payments of $75 each, due two weeks between. If you pay all payments on time then you’ll have paid the purchase off within six weeks.

While pay-in-four plans don’t usually charge interest, longer-term BNPL plans could charge an annual rate of percentage up to 30 percent. Fees, like for late or rescheduled payments, can range from one dollar to $10 and are sometimes capped at 25% of the purchase value according to the company.

Should you use buy now and or pay later?

There are several things to think about when deciding to choose an BNPL payments plan.

NerdWallet recommends the use of BNPL only for necessary expenses such as a mattress for your apartment or a laptop computer to use at school. Though the plan may seem simple and low-cost, you’re still taking on debt, and it’s rarely recommended to go into debt for an unnecessary purchase.

It’s also advisable to look for a BNPL plan with zero to minimal interest. This will decrease your monthly payment and allow you to pay back the loan.

If you’re having trouble paying your bills or , steer away from buying now, pay later. Because of its convenience it’s easy to spend too much when using BNPL. If this occurs, you could be charged charges that are excessive as well as be ordered to collect, which can affect your credit score.

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BNPL pros

BNPL cons

Zero-interest plans available.

There is no minimum credit score needed.

Available at most major retailers during checkout.

Some plans may charge interest.

Some plans may charge fees.

Payments may not be disclosed to three main credit bureaus.

It is easy to spend too much.

Customer service options are limited.

For some shoppers, paying with alternative payment options like . Not only do most credit cards offer cash rewards or cash rewards They also report on-time payments to the credit bureaus, something that not many BNPL companies are able to do. An established track record of timely payments can improve your credit score, and also give you more affordable financing options in the near future.

In contrast to BNPL and other credit cards, all credit cards charge interest, which you can avoid by paying off the balance each month.

Credit cards are also carefully regulated, which means there are other consumer protections that are in place, such as greater transparency in costs and more stringent underwriting requirements, both of which can keep people from overextending their credit limit.

In a potential sign of more oversight in the future of the pay now, pay later market and the Consumer Financial Protection Bureau released a study in September, which identified a number of risks associated with making use of BNPL that include an absence of consumer protections and the ease of debt accumulation and the possibility of data harvesting. The CFPB declares it will continue to work on addressing these issues and could result in more control of BNPL.

What apps allow you to purchase today and later?

It has partnerships with retailers such as Amazon, Walmart and Nordstrom. While its pay-in-four plan is always zero interest but its monthly plans, which have terms that extend to 60 months, cost interest based on the store you shop at. Some of the Affirm’s partner stores offer zero interest however some may charge up to 30% APR. Affirm doesn’t charge late fees.

It offers a simple pay-in-four model. It has a partnership with retailers such as Old Navy, Gap and Bed Bath & Beyond. When you make your payment on time, there are no additional fees associated with Afterpay. However, if your payment isn’t received within 10 days of the due date, you’ll be charged an amount of up to $8.

is offered at stores like Sephora, Foot Locker and Macy’s. Its pay-in-four plan also charges no interest. However, in the event that you’re more then 10 days behind on a payment, Klarna will charge a late fee of up to $7.

The plan offers a pay-in-four-payment option online and through its mobile application at locations such as Best Buy, Target and Home Depot. It does not charge interest or late fees.

, offered at thousands of retailers , including Target, charges zero interest for using its pay-in-four plan. Though it doesn’t charge late fees however, it will deactivate your account whenever you don’t make a payment, and you’ll be required pay a $10 reactivation cost to use Sezzle again.

The plan, previously known as Quadpay, is available anywhere Visa is accepted by downloading Zip’s mobile application. It charges a convenience fee for each payment the pay-in-four program and an additional $5, $7, or late fee of $10 for missed payments, depending on which state you reside in.

APR

Terms

Fees

5.0 NerdWallet rating NerdWallet’s ratings are determined by our editorial team. The scoring algorithm takes into consideration aspects we believe are friendly to consumers, such as the impact on credit score, rates and fees, customer experience and responsible lending practices.

0%-30%.

4 installments, due every two weeks; monthly payment plans range between 3 to 60 months.

There are no fees.

5.0 NerdWallet rating NerdWallet’s ratings are set by our editorial team. The scoring formula considers the factors we believe to be a good choice for consumers, such as the impact on credit score rate and fees, customer experience and ethical lending practices.

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