As costs continue to climb for everyday essentials like housing, groceries and gas, Americans are turning to “buy now, pay later” (BNPL) to help shoulder the expense.
One in five BNPL users paid for groceries or food delivery with the product in the past year, according to a recent report from the Federal Reserve . Nearly half of those users said that BNPL was the only way they could afford the purchase.
While BNPL can be a quick way to get cash, it’s not without risk. We break down how BNPL works and whether it’s a good idea for you to use it.
How does buy now, pay later work?
BNPL divides your purchase into equal payments, with the first payment typically due at checkout. The remaining payments are then billed to your debit, credit card or bank account until your purchase is paid in full.
The plan you’re offered will vary by provider, but most use a “pay-in-four” model, which divides your purchase into four equal installments.
For example, if your total is $200, you'll only pay $50 upfront. You’ll then have three remaining payments of $50, each due two weeks apart. As long as you make all payments on time, you'll pay off your purchase in six weeks.
Are there any costs associated with using BNPL?
Pay-in-four plans almost never charge interest. Longer-term BNPL plans, where payments are spread out over months or even years, may charge an annual percentage rate up to 36%.
Some providers also charge fees. Late fees are particularly common and are usually capped at 25% of the purchase value. There may also be failed payment fees, payment rescheduling fees, service fees or origination fees. It’s important you research the provider and any fees they may charge before agreeing to a BNPL loan.
How to get approved for buy now, pay later
You’ll likely see a BNPL payment option when you check out online at a retailer. To sign up, you’ll fill out a short application, which may ask for information like your name, email address, date of birth, phone number and Social Security number. You'll also provide a payment method.
Then, the BNPL provider will perform a soft credit check, which won't affect your credit score, and approve or deny your application in seconds.
Exact approval criteria varies by provider. But even if you have bad credit, you can likely still get approved, since most providers consider multiple factors when reviewing your application. Here’s what they’ll be paying attention to:
- Credit score and credit history.
- The cost of your purchase.
- The funds available on your chosen payment method, such as your debit card.
- Any prior history with that provider, including how long you’ve had an account, past purchases, payment history, outstanding loans, etc.
🤓 Nerdy Tip
One of the best ways to increase your chances of getting approved for a BNPL loan is to start with a small purchase that you can pay off on time or early. This builds a positive repayment history with the BNPL company and may help you get approved for a larger purchase in the future. Does buy now, pay later affect your credit score?
It can, depending on whether the BNPL provider reports your payment history to the credit bureaus.
Last year, the credit score company FICO announced it would start incorporating BNPL loan data into credit scores . But credit reporting is still inconsistent across providers.
To be on the safe side, always repay your BNPL loans on time, and try to avoid loan stacking, which is when you take out multiple BNPL loans at once. Loan stacking makes payments harder to keep track of, and it may increase your overall credit utilization, which could hurt your score.
Should you use buy now, pay later?
There are several things to consider when deciding whether to use a BNPL payment plan.
Is your purchase necessary? NerdWallet recommends using BNPL only for essential purchases you can’t do without, like a mattress. Though these plans may seem simple and affordable, you’re still taking on debt, and it’s rarely a good idea to go into debt for a nonessential item.
Can you cover the payments plus other expenses? If you’re struggling to pay your bills or start an emergency fund, try to steer clear of buy now, pay later. Because of its convenience, it’s easy to overspend with BNPL, and you may end up owing more than you can repay.
Are there other ways to cover that purchase? If you’re using BNPL to pay for daily essentials like groceries, there may be better ways to pay your bills or lower other major expenses, like housing, so you don’t have to take out a BNPL loan.
Does the plan charge interest? If you decide to use a BNPL plan, look for one with no interest. This will make it easier for you to pay back the loan, since you’re not paying more on top of the initial purchase.
When shouldn’t you use buy now, pay later?
If you don’t need to make the purchase, or if you’re not sure you can keep up with the payments for the duration of the loan for any reason, try to avoid using BNPL.
Though BNPL may seem like a convenient payment option, it’s still a loan, meaning you may risk falling behind on payments and damaging your credit.
Did you know?
The Consumer Financial Protection Bureau released a report in 2025 that shows the majority of BNPL loans are held by borrowers with subprime or deep subprime credit scores (meaning borrowers with bad credit) . BNPL users also tend to hold larger amounts of other unsecured debts, like credit cards, than non-BNPL users. Though the CFPB doesn’t draw direct conclusions from this report, it suggests that BNPL users may be particularly financially vulnerable and should exercise caution around these apps.
Pros and cons of buy now, pay later apps
Consider these pros and cons when deciding whether to use BNPL for your next purchase.
Pros
No-interest financing.
No hard credit check.
Convenient payment option.
Cons
May encourage overspending.
Not a reliable way to build credit.
May charge fees.
Customer service issues.
Pros of BNPL
No interest: Most BNPL apps charge zero interest for their pay-in-four loans. That means if you make all payments on time, you use the service for free. It’s rare to be able to finance a purchase, especially a bigger ticket item like a computer, at zero interest.
No hard credit check: Unlike credit card or loan providers, BNPL apps don’t usually conduct a hard credit pull, which temporarily knocks a few points off your score. Also, if you’re worried about a low credit score, you may have an easier time getting approved by a BNPL app than a traditional lender.
Simple, convenient and fast financing option: BNPL providers pride themselves on the simplicity and ease of their payment plans. Loan applications are short, and providers can approve you instantaneously, usually without ever leaving a retailer’s checkout screen.
Cons of BNPL
Could encourage overspending: Research has shown that people tend to spend more when they use BNPL, because purchases seem smaller and their budgets feel more flexible . For example, if you plan to spend no more than $100 at checkout, and you opt into a pay-in-four plan, you’ll only pay $25 upfront. It may be tempting, then, to fill up your cart with more items.
Unlikely to build credit: BNPL is not a reliable way to build credit, even with the new scoring models. If building credit is a priority for you, it's better to go with a more established financial product, like a credit card or credit-builder loan.
Fees: Though some BNPL apps don’t charge any fees, many do — especially if you miss a payment. Fees for late or rescheduled payments typically range from $2 to $17, represent a significant percentage of the total and increase the overall cost of your purchase.
Customer service issues: Some BNPL users have trouble settling disputes. For example, if you buy an item you need to return, you must deal directly with the store, even though your loan is through the BNPL lender. This can delay your refund, and you may be stuck making biweekly payments in the meantime.
Compare buy now, pay later apps
The best BNPL provider typically charges zero interest for a pay-in-four plan and no fees if you pay on time.
As part of our editorial process, we collected hundreds of data points for the six major BNPL apps. In the table below, see the overall star rating for each app, as well as key information about interest, terms and fees. This information is updated annually.
| Interest | Terms | Fees | |
|---|---|---|---|
 on NerdWallet's secure website |
|
|
|
 on NerdWallet's secure website |
|
|
|
 on NerdWallet's secure website |
|
|
|
 on NerdWallet's secure website |
|
|
|
 on NerdWallet's secure website |
|
|
|
 on NerdWallet's secure website |
|
|
|
Frequently asked questions about BNPL
How do you start using buy now, pay later?
To get started with buy now, pay later, you can download a BNPL app to your phone, select a BNPL payment plan during online checkout or opt-in to a pay-later option from your credit card.
Is buy now, pay later considered a loan?
Buy now, pay later is considered an installment loan. A BNPL company lends you the money upfront to complete a purchase. You then pay back the loan over a series of equal installments, with or without interest.
Is buy now, pay later bad for your credit?
Using buy now, pay later shouldn’t hurt your credit score as long as you make payments on time. Any late payments could be reported to the credit bureaus, which would hurt your score. You could also be sent to collections, which would further damage your credit.
What is the best buy now pay later app?
Some of the largest BNPL apps include Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip. The best BNPL app offers no-interest loans with zero fees.
Which buy now, pay later app doesn't check credit?
All buy now, pay later apps check your credit with a soft pull, which won’t hurt your credit score. Even if you have bad credit, you can still be approved, since BNPL providers consider additional factors, like the cost of your purchase and any prior history with the company.
How does buy now, pay later make money?
Buy now, pay later providers make money in a few ways. One is by charging the merchant (aka the retailer you’re making the purchase from) a fee each time the provider helps facilitate a transaction. Another is by collecting interest and fees directly from customers who take out a BNPL loan.
Article sources
NerdWallet writers are subject matter authorities who use primary,
trustworthy sources to inform their work, including peer-reviewed
studies, government websites, academic research and interviews with
industry experts. All content is fact-checked for accuracy, timeliness
and relevance. You can learn more about NerdWallet's high
standards for journalism by reading our
editorial guidelines.
- 1. Federal Reserve. Report on the Economic Well-Being of U.S. Households in 2025 - May 2026.
- 2. FICO. FICO Unveils Groundbreaking Credit Scores That Incorporate Buy Now, Pay Later Data. Accessed Jun 24, 2026.
- 3. Consumer Financial Protection Bureau. Buy Now, Pay Later: Market trends and consumer impacts. Accessed Jun 24, 2026.
- 4. Consumer Financial Protection Bureau. Consumer Use of Buy Now, Pay Later and Other Unsecured Debt. Accessed Jun 24, 2026.
