What you need to know about Buy Now, Pay Later financing
You’ve likely made an online purchase recently and were given the option to finance it over a period of time. This is a short-term financing option known as “Buy Now, Pay Later” or BNPL. If you’re tight on cash, BNPL can help buy you time as you’re able to pay for the purchase over a series of interest-free installments administered by a third-party company. While at times helpful, unfortunately, BNPL comes with both pros and cons that all consumers should be aware of.
Typically, BNPL is available for purchases ranging from $50 to $1,000 or more. The payment is broken up into a set number of interest-free installments, with the first installment being due at the point of purchase and the remaining payments due over the following weeks or months.
BNPL financing has grown rapidly in recent years, largely due to increased consumer spending habits during the pandemic. According to the Consumer Financial Protection Bureau, the leading BNPL firms originated 180 millions loans totaling over $24 billion in 2021, a tenfold jump compared to 2019. The top BNPL providers in 2025, according to Forbes, are Klarna, Splitit, Affirm, PayPal, and Afterpay.
Before using BNPL, it’s important to consider the pros and cons of this financing option:
Pros of BNPL
Say you’re looking to make a significant purchase, such as a piece of furniture, a new television, or a bicycle. If you’re on a tight budget, you might be inclined to pay for a purchase like this with your credit card, giving you extra time to pay off the bill. BNPL goes a step further and gives you the option to pay for the purchase in evenly divided installments spread out over multiple months.
Additionally, BNPL often comes with no interest if you make your payments on time, and a credit check or pre-approval usually isn’t required. For some consumers, this makes BNPL a favorable alternative to using a traditional credit card or other type of loan.
If you’re confident you’ll have the ability to pay off each installment on time, BNPL might be a good option for you.
Cons of BNPL
While BNPL has become increasingly popular in recent years, this financing method isn’t without its downsides. Most notably, if you miss a payment, you may be subject to steep interest rates or late fees on your purchase. Some providers, for example, subject you to fees up to $35 and others have interest rates as high as 36%. This of course can add up significantly on top of the initial cost of your purchase.
While you might not have needed a credit approval to use BNPL, a missed payment can be reported by the provider to your credit bureau, potentially bringing down your credit score. On the other hand, if you set up automatic payments but don’t have the funds in your account, you might be subject to overdraft fees from your bank.
BNPL may also enable over-spending habits. Let’s be honest: living in an era of over-consumerism, we’ve all made unnecessary purchases before or spent more on shopping than we budgeted for. So, the next time you find yourself considering using BNPL, it’s worth asking yourself if that purchase is really necessary.
The bottom line
If you decide to use BNPL, it’s imperative to thoroughly understand the terms, conditions, and potential fees and interest rates to avoid getting yourself in financial trouble. In many cases, it’s better to stick with a traditional credit card or personal loan, as these are often more straightforward and have lower interest rates.
