Your Guide To Buy Now, Pay Later Apps

Find out what you need to know about this popular checkout option.

Buy Now, Pay Later (BNPL) apps have exploded in popularity, offering shoppers the ability to split purchases into smaller, usually interest-free payments. While these apps can be convenient, they also come with important considerations.

Buy Now, Pay Later Apps

How It Works

While the details will vary by provider, most BNPL programs boast about not charging fees or interest, as long as you pay as agreed in the terms and conditions. Here’s a list of the most popular providers and an overview of their terms.

• Affirm – Interest may or may not be charged depending on the purchase amount and where you’re shopping. There are no late, prepayment, annual, or account opening or termination fees.
• Klarna – Choose between splitting the cost of a purchase into 4 interest-free payments, paying in 30 days, or financing for larger purchases. Only the latter will have interest charges.
• PayPal Credit – With Pay in 4, you can break your purchase up into 4 interest-free payments. Purchases can be made online wherever PayPal is accepted.
• Afterpay, Sezzle, Zip – Split any purchase into 4 installments over 6 weeks with no interest. Shop online or in store using a digital wallet.

It’s important to note that BNPL activity is beginning to factor into new credit scoring models. Paying on time could help your credit, while missed or late payments may work against you. Always review the terms and be sure the payments fit your budget.

Providers and products are mentioned for educational purposes only. This in no way constitutes an endorsement or approval by A+FCU. Refer to the external organization’s site for the most up-to-date information as their products and terms are subject to change.

Advantages

There are a number of perks that come with most BNPL options. Here are some of the most notable:

• Little-to-no interest and fees – If you’re unable to pay in full, a zero-interest option can help avoid needing to qualify for a loan or charging purchases on a high-interest credit card.
• Credit-building potential – With new FICO scoring models, on-time BNPL payments could help strengthen your credit.
• Convenience – Instant approval offers are integrated into a large number of retail sites and give you an opportunity to break balances up into interest-free payments.

Disadvantages

It’s important to note that availability may vary by state. Here are some more noteworthy drawbacks:

• Facilitates overspending – Though being able to access money you don’t have is nice, programs like this can enable you to live beyond your means.
• Can be costly – There may be fees and interest under certain circumstances. Klarna and Afterpay, for example, can charge up to 25% of the purchase price in late fees. Affirm, who charges interest in some cases, offers rates ranging from 0-36% APR* with approved credit.
• Impact on credit score – With FICO Score 10 BNPL and 10 T BNPL, missed or late payments can now negatively affect your credit.

Considerations

As always, it’s important to do your research before agreeing to anything. When it comes to evaluating your options, refer to the legal terms, FAQs, or help center, for information on how the account works, possible costs, and credit implications.

*APR=Annual Percentage Rate