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Splitit touts itself as the "responsible" buy now, pay later option since it doesn’t require taking on new financing. Instead, it allows you to use an existing credit card to break down purchases into installments with select merchants.
In short, instead of charging your card the entire purchase price at the time of the sale, a merchant using Splitit will charge your card a portion of the price each month until it's paid off.
Users won't pay additional interest or fees beyond what their credit card issuer may charge for ongoing balances or missed payments. Compared with other buy now, pay later options, Splitit is a decent deal — assuming you can afford to pay off the purchase on time. It’s not ideal if you’re having trouble paying bills or saving an emergency fund.
Even if you see it as a way to free up your cash flow, there are a few things to consider before selecting this payment option.
1. New financing isn’t required
Since Splitit doesn't require new financing, you don’t have to fill out an application or undergo a soft credit check as is the case with some other buy now, pay later options. An added bonus is that you can also collect cash back, points or miles on the purchase over time if you charge it to a rewards credit card.
The merchant you're shopping with charges your credit card every month with an installment plan that you choose at checkout. In addition to this charge, you’ll see an "authorization hold" on your credit card statement about every 21 days for the entire amount outstanding.
It may appear as a pending transaction on the credit card statement, but it’s not a charge. The purpose of the authorization hold is to guarantee the payment. You should see these authorizations decreasing by one installment amount every month until the purchase is paid in full.
Your credit card may already offer a version of buy now, pay later with predictable payment plans for eligible purchases. Look inside your wallet to determine if these options are available: American Express Plan It®, My Chase Plan®, Citi Flex Pay or Mastercard Installments. Terms and monthly fees may apply, depending on the option.
2. Only purchases with select merchants qualify
Splitit is available for purchases made with select merchants in store or online. Merchant categories vary and include home and furniture, beauty, fashion, jewelry, electronics, automotive, health and others.
Online, you may check out with a credit card. Inside an eligible store, the sales associate can initiate the installment option when you’re making a large purchase. Splitit allows checking out with details stored in Apple Pay or Google Pay. Otherwise, the sales associate will create a payment plan, then email, text or provide a QR code with a pay-by-link form. You can add your payment details on the form and proceed to complete the transaction.
3. Splitit doesn’t charge fees or interest
Unlike other buy now, pay later options, Splitit doesn’t charge the buyer interest or fees. Splitit makes money by charging the merchant or retailer a fee for each transaction.
It’s important to understand that interest and fees from your credit card may still apply. By staying on track with payments, you’ll avoid the consequences of not paying a credit card bill. Missing a payment could hurt your credit score or lead to a higher interest rate, for example. Since the purchase goes on your credit card, the payments may be reported to credit bureaus. When you use other buy now, pay later options, the payments aren’t typically reported this way.
While Splitit doesn’t cost you anything to use, defaulting on a payment may result in the service charging your credit card for the amount owed. The account could also go to collections.
By paying off the credit card bill in full each month, you can potentially avoid interest charges whether the card is used to directly make a purchase or divide one with Splitit. Another interest-saving option is to combine Splitit with a 0% intro APR offer on a credit card if you prefer predictable payments.
4. Installments may pack short- and long-term options
Depending on the options available at checkout, you may choose different installments, sometimes ranging from three months up to 24 months, for example. The merchant determines the different installment options offered and you make a selection. Choose the option that will allow you to pay off the credit card in full each month to avoid interest charges. By making payments more manageable, you’ll be able to pay the purchase off easily and avoid paying more than the value of the item.
A buy now, pay later option makes it easier to purchase an item, but it’s still a form of debt. Going into debt for nonessential items isn't worth it. Use this option only for essentials that you can afford to pay off over time.
5. Not all cards are well-received
You may use Splitit with a Visa, Mastercard or Discover if the merchant accepts it. In some cases, some merchants may not accept credit cards from certain networks. Debit cards, prepaid cards and other types of credit cards aren't accepted.