What Is Buy Now, Pay Later?

Like its name suggests, "buy now, pay later" lets you make a purchase and receive it immediately but pay for it at a later time, usually over a series of installments.

Though this type of payment plan has been available for years, it exploded in popularity during the pandemic as more people shifted to online shopping.

You can now use a buy now, pay later plan at most major retailers, but whether you should depends on the plan and your financial situation.

What is buy now, pay later?

Buy now, pay later, or BNPL, is a type of installment loan. It divides your purchase into multiple equal payments, with the first due at checkout. The remaining payments are billed to your debit or credit card until your purchase is paid in full.

These plans can come with interest and fees, though some plans, depending on the provider, charge neither.

You’ll often see BNPL payment plans when you shop online, and many plans are available in stores.

You can also find BNPL for travel and BNPL for health care.

How does buy now, pay later work?

During checkout, you’ll see an option to break up your total purchase and pay a smaller amount now, instead of the full balance.

If interested, you’ll fill out a short application directly on the checkout screen. It 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 may perform a soft credit check, which won't affect your credit score, and approve or deny your application in a matter of seconds.

» MORE: Could a buy now, pay later loan affect my credit?

Approval criteria vary, but even if you have bad credit or no credit, you may still be eligible.

The plan you’re offered will also vary by provider, but many companies use a “pay-in-four” model, which divides your purchase into four equal installments, each due two weeks apart, with the first payment due immediately.

For example, if your total purchase is $300, you'll pay $75 at checkout, then have three remaining payments of $75, each due two weeks apart. As long as you make all payments on time, you'll pay off your purchase in six weeks.

While a pay-in-four plan doesn’t usually charge interest, longer-term BNPL plans may charge an annual percentage rate up to 30%. Fees, like for late or rescheduled payments, range from $1 to $10 and are sometimes capped at 25% of the purchase value, depending on the company.

Should you use buy now, pay later?

There are several things to consider when deciding whether to choose a BNPL payment plan.

NerdWallet recommends using BNPL only for necessary expenses, like a mattress for your apartment or a computer for school. Though the plan may seem simple and low-cost, you’re still taking on debt, and it’s rarely a good idea to go into debt for a nonessential purchase.

You’ll also want to look for a BNPL plan with zero to minimal interest. This will lower your monthly payments and make it easier for you to pay back the loan.

If you’re struggling to pay your bills or start an emergency fund, steer clear of buy now, pay later. Because of its convenience, it’s easy to overspend with BNPL. If that happens, you may incur high fees or be sent to collections, which will hurt your credit score.

» MORE: Nearly 78 million Americans used BNPL in the past year

For some shoppers, paying with alternatives like credit cards may be a smarter financing choice. Not only do most credit cards earn rewards or cash back, but they also report on-time payments to the credit bureaus, which not many BNPL companies do. A history of on-time payments can help build your credit score and open the door to more affordable financing options in the future.

Unlike BNPL, most credit cards charge interest, which you can avoid by paying off the balance each month.

Credit cards are also carefully regulated, which means there are additional consumer protections in place such as more cost transparency and stricter underwriting criteria, both of which can keep people from overextending themselves.

In a potential sign of more oversight in the future for the buy now, pay later industry, the Consumer Financial Protection Bureau released a study in September, identifying several risks to using BNPL, including a lack of consumer protections, the ease of debt accumulation and the potential for data harvesting. The CFPB says it will continue work on addressing these issues, which could lead to greater regulation of BNPL.

What apps let you buy now, pay later?

Affirm partners with retailers like Amazon, Walmart and Nordstrom. While its pay-in-four plan is always zero interest, its monthly payment plans, which have terms up to 60 months, charge interest depending on where you shop. Some of Affirm’s partner stores charge zero interest, while others can charge up to 30% APR. Affirm doesn't charge late fees.

Afterpay offers a straightforward pay-in-four model. It partners with retailers like Old Navy, Gap and Bed Bath & Beyond. As long as you pay on time, there are no additional fees with Afterpay. However, if your payment isn't received within 10 days of the due date, you’ll be charged a maximum fee of $8.

Klarna is offered at stores like Sephora, Foot Locker and Macy’s. Its pay-in-four plan also charges no interest, but if you’re more than 10 days late on a payment, Klarna will charge a late fee of up to $7.

PayPal offers a pay-in-four payment plan online and through its mobile app at stores like Best Buy, Target and Home Depot. The plan charges no interest or late fees.

Sezzle, offered at thousands of retailers including Target, charges zero interest for using its pay-in-four plan. Though it doesn't charge a late fee, it deactivates your account when you miss a payment, and you'll need to pay a $10 reactivation fee to use Sezzle again.

Zip, previously known as Quadpay, is available anywhere Visa is accepted when you download Zip's mobile app. It charges a $1 convenience fee per payment for using its pay-in-four plan and a $5, $7 or $10 late fee for missed payments, depending on which state you live in.

» MORE: Compare buy now, pay later apps

Some retailers offer multiple BNPL payment options at checkout. If you’re stuck choosing between two or more plans, it’s usually best to pick the one that charges zero interest, since it’s more affordable. But make sure you can pay the installments on time.

Alternatives to buy now, pay later

Though buy now, pay later can provide a simple and convenient way to cover a purchase, it doesn’t offer the same features as other financing methods. You may want to consider these alternatives.

0% interest credit card: If you have good or excellent credit (a credit score of 690 or above), you could qualify for a 0% APR credit card, which charges zero interest during the card’s introductory period — usually 15 to 21 months. Credit card companies will report payments to the bureaus, which may help build your score. You may also receive a sign-up bonus or access to a rewards program.

» MORE: Buy now, pay later vs. credit cards: Which is right for you?