What is Buy Now Pay Later?

Buy now, pay later or BNPL is a payment option that lets you make a purchase now with little to no payment and defer the payment for later dates, usually in four installments. You can often avoid interest or fees if the balance is paid in full and on time. Many retailers and online stores offer this payment option to attract customers and increase sales.

Buy Now Pay Later

  • Pros and Cons of Buy Now Pay Later

    Pros Cons
    Immediately Purchase Goods – You can take home the items you need and want without paying in full. Debt Accumulation and Overspending – Due to the easy approval process and its design, buy now, pay later can easily lead you to overspending and fast debt accumulation.
    Easy Approval Process – All you need for approval are your phone number, automatic payment information, ID, and being 18 years and older. According to the CFPB, the approval rate was 73 percent in 2021. Lack of Federal Consumer Protection – Unlike credit cards, buy now, pay later companies don’t offer dispute protections if your purchase is faulty or a scam. Also, returns can be difficult for purchases made with buy now, pay later.
    No Credit Check – A hard credit inquiry is generally not conducted during the approval process. Missed Opportunities for Credit Building – Most buy now, pay later loans are not reported to the credit bureaus if you make payments as agreed.
    Lower or No Credit Cost – If the buy now, pay later loan balance is paid in full on time, in most cases, there are no interest or fees. Hefty Fees and Credit Damage when Unpaid as Agreed – The average buy now, pay later loan amount is around $150 and late or other fees can range from 1 percent to 25 percent of the purchase amount each time, depending on the company. Also, the buy now, pay later companies will likely report any missed or declined payments to the credit bureaus.

    When offered a buy now, pay later loan, think before making a quick decision. Read the fine print thoroughly and understand fees, credit impact, how to turn off autopay, and return policy. If you need to speak to somebody, some credit unions also offer free financial counseling services to their members.

  • Alternatives to Buy Now Pay Later

    1. Save – Saving guarantees you will reach your financial goal. Planning to save ensures you will reach your financial goal in a timely manner, using an actionable savings plan. Create your savings plan today using the NCUA’s Money Basics Guide to Budgeting and Savings.
    2. Payday Alternative Loans I (PALs I) – Federal credit unions offer small-amount loans called PALs I to its members. The loan amounts can range from $200 to $1,000, with a repayment period from 1 to 6 months.
    3. Borrow From Family or Friends – If the purchase needs to be made immediately, borrowing from family or friends can be an option.
    4. Credit Card – Paying with a credit card offers consumer protection, earns reward points or cash back, and helps build credit if paid on time. Although credit cards charge interest, accumulating debt can be avoided by paying the balance off every month.

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