Should You Buy Now, Pay Later?

Shopping cart on cell phone

When money is tight, the flexible payment options available with Buy Now, Pay Later (BNPL) loan programs can be a financial lifesaver. These no-interest, short-term installment loans let you buy clothes, furnishings, and other needed items from well-known retailers now, and pay for them later.

But there are risks to entering in to what sounds like a financial wonderland. Consider the pros and cons of using a BNPL loan to pay for your next purchase.

How BNPL Works

If you've been shopping online recently, you may have noticed that some retailers are offering something new at checkout. Besides standard payment options, you can choose Buy Now, Pay Later, which allows you to pay for a portion of your purchase at checkout and pay off the rest over several weeks or months.

To get started, you simply respond yes to a soft credit check. You'll receive an approval or denial within seconds. If you're approved, the retailer will ship your order, and the entire purchase should be in your hands before the next payment due date.

For example, if the BNPL program offers a four-payment installment plan, you make your first payment immediately so the retailer can process the order. The remaining three payments are due at regular intervals over the next six weeks.

If the BNPL request is denied, and you still want to buy the items in your cart, you must pay for them in full through one of the website's other payment options.


A zero- or low-interest rate BNPL loan allows you to get what you need now instead of waiting to save for it or using a high-interest rate credit card to cover the expense. Plus, other reasons make BNPL an attractive option:

  • You don't need good credit to qualify. Approval is easier compared to traditional credit applications. Minimum requirements vary, but you're likely to receive an approval despite having bad credit or no credit history.
  •  Applying has little effect on your credit score. When you apply for a loan or a credit card, a hard inquiry is made on your credit report. This causes a temporary dip in your credit score. When you apply for a BNPL program, the provider performs a soft credit inquiry, which does not affect your score.
  • You choose how to pay the balance. Most BNPL programs allow you to choose between manual payments and automatic deductions from your debit card or credit card. Some allow payment by check or online bill pay through your financial institution.


While a zero- or low-interest rate BNPL loan is an attractive payment option, there are several disadvantages that could affect your ability to achieve other financial goals. Some include:

  • On-time payments aren't reflected on your credit reports. Unlike with a traditional loan, good credit behavior related to BNPL loans isn't reported to the major credit-reporting bureaus. This is a missed opportunity to record positive credit behaviors and possibly boost your credit score.
  • Missed or late payments do appear on your credit reports. As with traditional loans, poor credit behavior is reported to the major credit-reporting bureaus. In addition, failing to make payments as agreed could result in late fees and penalty charges.
  • Inability to earn credit card rewards. If you're trying to rack up reward points for a special trip or expense, choosing BNPL could delay the achievement of your goal.
  • Purchase limitations. Not all online retailers participate in BNPL programs. As of December 2021, 30 retailers offered this option. There may also be a dollar limit to how much you can finance at checkout with the program.
  • Larger, more frequent payments. If you always pay the minimum on your credit card, a BNPL repayment schedule may shock your budget. However, the larger payments allow you to pay off the item in a shorter time frame and escape the potential problems associated with lingering debt.

Is BNPL Right for Me?

While the flexibility of most BNPL programs is undeniable, this payment option isn't for everyone. If the dollar amount and frequent payment due dates don't fit your budget, a BNPL could harm your finances. Remember, late payments could result in fees and leave a negative mark on your credit history report. Read the terms and conditions of the loan you're considering before signing on the dotted line. Program details vary by provider.