What is the Difference Between Buy Now, Pay Later?

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What is What is Now, Pay Later?
"Buy now, pay later" splits the total cost of your purchase into a series of equal installments, with the first due at checkout.


Updated on October 26, 2022.

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Similar to the title, "buy now, pay later" allows you to make a purchase and receive it instantly, however you pay for it later at the time of purchase, typically through a series of installments.
Although this kind of payment plan has been available for years, it exploded in popularity in the wake of the pandemic, when more people switched towards online shopping.
It is possible to use the buy now pay later option at a lot of major retailers, however whether you should depends on the plan you choose and your financial situation.
What do you want to buy now, pay later?
Buy now, pay later, or BNPL, is a type of installment loan. It splits your purchase into equal installments with the first due at the time of purchase. The remaining payments are billed to your credit or debit card until your purchase is fully paid.
The plans may include fees and interest, but some plans, depending on the service provider, don't charge neither.
You'll find BNPL payment plans when you shop on the internet, and a variety of plans are also available in retail stores.
You can also search for and .
What is the best way to buy now and pay later work?
At checkout, you'll have the option to split the total amount of your purchase and pay a lesser amount now, instead of the full balance.
If interested, you'll fill out a short application directly on the checkout screen. The application may require information like your name and email address, birth date and date of birth. telephone number, and Social Security number. Additionally, you'll need to provide an option to pay. The BNPL provider can conduct an uninvolved credit check which will not affect your credit score. They will approve or deny your application in only a few minutes.
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Criteria for approval differ and, despite the fact that you have bad credit or no credit, you could still be eligible.
The plan you're offered will depend on the provider However, many businesses use a "pay-in-four" modelthat splits the purchase into four equal installments that are scheduled to take place two weeks later, with the first payment due on the same day.
For instance, if the total amount of your purchase is $300, you'll pay $75 at checkout, then you'll have three payments totaling $75, each due two weeks apart. As long as you make all payments on time then you'll have paid off your purchase in six weeks.
Although a pay-in-four program doesn't usually charge interest, longer-term BNPL plans may have an annual rate of percentage up to 30 percent. Charges, for delayed or rescheduled payments range from $1 to $10 and can be capped at 25 percent of the value of the purchase, depending on the company.
Should you use buy now and then pay later?
There are a variety of factors to take into consideration when deciding to choose an BNPL payment plan.
NerdWallet suggests the use of BNPL only for necessary expenses like the purchase of a mattress for your home or a laptop computer to use at school. While the plan might seem straightforward and affordable however, you're taking on debt, and it's rarely a good idea to go into debt for a nonessential purchase.
It's also advisable to look for an BNPL plan with zero to minimal interest. This will lower your monthly payments and help you to repay the loan.
If you're having trouble paying your bills or have a problem paying them, steer clear of buy now, pay later. Because of its convenience, it's easy to overspend using BNPL. If that happens, you'll be subject to charges that are excessive or be sent to collections, which could affect your credit score.
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BNPL pros



BNPL cons



Zero-interest plans available.
There is no minimum credit score requirement.
Available at most major retailers during checkout.



Some plans may charge interest.
Some plans may charge fees.
Payouts are not disclosed to three major credit bureaus.
Easy to overspend.
Limited customer service options.









For certain shoppers, it is possible to pay with alternatives like . Not only do most credit cards earn cash-back or rewards They also submit on-time payments to credit bureaus, which not all BNPL companies have to do. A history of on-time payments can improve your credit score, and also provide you with more affordable loans in the future.
Contrary to BNPL however, the majority of credit cards are charged interest. You can avoid by paying the balance each month.
Credit cards are also carefully controlled, which means that consumers are protected by additional safeguards in place such as more cost transparency and stricter underwriting guidelines, both of which can keep people from overextending themselves.
As a possible sign of more oversight in the future of the pay now pay later market, the Consumer Financial Protection Bureau released an analysis in September identifying several risks to using 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 efforts to address these concerns and could result in greater oversight of BNPL.
What apps allow you to purchase today and later?
collaborates with retailers such as Amazon, Walmart and Nordstrom. While its pay-in-four plans are always zero interest, its monthly payment plans, which can last up to 60 months, charge interest depending the place you shop. Certain of Affirm's partner stores charge zero interest, while others can charge up to 30% APR. Affirm doesn't charge late fees.
It offers a simple pay-in-four model. It is partnered with retailers like Old Navy, Gap and Bed Bath & Beyond. If you pay on time, there's no additional fees associated with Afterpay. However, if you don't receive your payment within 10 days of the due date, you'll be charged an amount of up to $8.
It's available at stores such as 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 late with the due date, Klarna will charge a late fee of up $7.
offers a pay-in-four payment plan both online and through its mobile app at retailers such as Best Buy, Target and Home Depot. It does not charge charges for late or interest.
, offered at thousands of retailers , including Target it charges no fees for its pay-in-4 plan. While it does not charge a late fee however, it will deactivate your account if you fail to make a payment, and you'll need to pay a $10 reactivation cost for using Sezzle again.
The plan, previously called Quadpay, is available anywhere Visa is accepted by downloading Zip's mobile app. It charges a $1 convenience fee per payment for paying with its pay-in-four option and the $5, $7 or $10 late fee for late payments, based on the state you live in.
APR



Terms



Fees



5.0 NerdWallet rating NerdWallet's ratings are set by our editorial team. The scoring algorithm takes into consideration aspects we believe are consumer-friendly, including impact to credit score, rates and fees, customer experience and ethical lending practices.




0%-30%.


4 installments, due every two weeks; Monthly payment plans are available between 3 and 60 months.


No cost.


5.0 NerdWallet rating NerdWallet's ratings are set by our editorial team. The scoring algorithm takes into consideration aspects we consider to be beneficial to consumers, including impact to credit score, rates and fees as well as the customer's experience and ethical lending practices.




0%.


4 installments, due every 2 weeks.


A late fee of $8.


5.0 NerdWallet rating NerdWallet's ratings are set by our editorial team. The scoring formula considers factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and ethical lending practices.




0%.


4 installments, due every 2 weeks.


$7 late fee.


4.5 NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring algorithm takes into consideration aspects we consider to be a good choice for consumers, such as the impact on credit score, rates and fees as well as the customer's experience and responsible lending practices.




0%.


4 installments, due every 2 weeks.


No cost.


5.0 NerdWallet rating NerdWallet's ratings are set by our editorial team. The scoring formula considers aspects we believe are friendly to consumers, such as the impact on credit score, fees and rates as well as the customer's experience and ethical lending practices.




0%.


4 installments, due every 2 weeks.


$0 late fee.
$5 rescheduling fee.
$10 account reactivation fee.



4.0 NerdWallet rating NerdWallet's ratings are set by the editorial staff. The scoring formula considers aspects we believe are friendly to consumers, such as the impact on credit score rates and fees, the customer experience and ethical lending practices.




0%.


4 installments, due every 2 weeks.


$1 convenience fee per installment.
$5, $7 or $10 late fee.









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Certain retailers provide different BNPL payment options at checkout. If you're forced to choose between two or more options, it's usually best to select the one that has no interest since it's less expensive. Make sure to make the payments promptly.
Alternatives to buying today, and pay later
Though buy now, pay later can provide a simple and easy method to pay for the cost of a purchase, it does not offer the same features like other financing options. You might want to think about these options.
0% interest credit card: If you have good and excellent credit (a credit score of 690 or higher) then you may qualify for a credit card that has no interest for the initial period of the credit cardtypically 15 to 21 months. Credit card companies send payments to credit bureaus, which can aid in building your credit score. You may also receive the opportunity to sign up for a welcome bonus or gain access to an rewards program.
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Small personal loan: If you want longer terms for repayment it could be a smart choice. Personal loans are offered to borrowers across the credit spectrum, and like credit cards, you can show the history of punctual payments to the bureaus. The interest rate is higher on personal loan but, having a long-term contract, your monthly payment may fit more comfortably in your budget.


The author's bio: Jackie Veling covers personal loans for NerdWallet.







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