Once only offered as a store’s layaway program, Buy Now, Pay Later (BNPL) apps have been rising in popularity and partnering with major retailers to provide more ways to get what you need faster. Like a layaway program, they allow consumers to pay for purchases over monthly installments. However, unlike layaway, you get to take home the product right away rather than when you make your final payment.
A Word of Warning
Buy Now, Pay Later companies come at the risk of adding to your financial burden. If you're already struggling to keep up with bills and debt payments, adding another could prove dangerous. Plus, these companies may charge high-interest rates if you don't pay off your purchase in full by the allotted time. They may also charge high late fees.
The crucial question is whether you believe you will be in a position to comfortably make payments when they are due, and in a manner that aligns with your budget. If the answer is "yes," then a BNPL provider may be for you.
What Is Buy Now, Pay Later?
BNPL is a type of service shoppers can use to receive a product immediately but pay for it later in agreed-upon installments, such as a series of months.
In some cases, these are interest-free payments and are useful for those who don't want to put a large amount on their credit card or don't have a credit card at all. In either case, this deferred payment strategy still counts as a form of debt.
How Do Buy Now, Pay Later Apps Work?
BNPL apps allow you to make purchases online through participating retailers on their app. When you check out, you choose to pay in installments instead of in full. You then pay the BNPL company either monthly, bi-weekly, or weekly. BNPL apps do charge interest but may offer an interest-free period. Otherwise, you may end up with a high amount of interest.
Best Buy Now, Pay Later Apps
|Afterpay||Shoppers who can afford an upfront deposit amount|
|Klarna||Shoppers who want discounts from their favorite retailers|
|PayPal||Shoppers who want up to six months to pay off their purchases|
|Affirm||Shoppers who don’t mind paying interest and have the ability to spread out their payments for up to 18 months|
|FuturePay||Shoppers who want to be able to carry over their monthly installment payments|
|Sezzle||Shoppers who are comfortable using an app and paying a 25% downpayment|
|Splitit||Shoppers who prefer no credit checks or applications|
|Perpay||Shoppers who want to increase their credit score|
Afterpay is one of today’s most popular apps, allowing you to make purchases and pay interest-free over three or four installments. Participating retailers include American Eagle, Adidas, and Urban Outfitters. You’ll receive your agreement after you pay. It shows what your future installments will look like bi-weekly as well as the upfront deposit amount.
There is no interest charged, but you may be subject to a $35 late fee if you miss a payment. Plus, Afterpay may charge the full amount owed on your credit card if you default.
Klarna allows you to spread out purchases with bi-weekly interest-free installments - you pay the first installment when you make your purchase. You won’t be charged late fees or interest as long as you make on-time payments. If you default on the account, Klarna could close your account and charge the remaining balance to your card.
PayPal is one of the most widely used BNPL services. You can use it at any retailer that accepts PayPal. Think of this service as a credit line like a credit card so you can use the account multiple times. You won’t pay interest on purchases of at least $99 and you pay it off in full within six months. Otherwise, the annual percentage rate (APR) can be as high as 19.99%, though it’s known to fluctuate much higher.
Related: PayPal Prepaid MasterCard® Review
Affirm’s participating retailers include Walmart. Affirm offers real-time decisions to help you make online purchases. One of the main advantages is that you can spread your payments out for 18 months, though you will be charged interest. It can be a good option if you can qualify for an interest rate lower than you would get with a credit card.
FuturePay may not partner with many major retailers, but you can finance your purchases by choosing to pay them by the end of the month or carrying a portion of your balance to the next. If you do carry over the balance, you’ll be charged a low $1.50 per month for every $50 you carry over. You’ll also accrue late fees if you don’t make on-time payments.
Zip’s best perk is that it works with either participating retailers or anywhere that accepts Visa cards. You’ll be subject to a soft credit check. It’s possible to receive approval instantly. You can then split your purchases into four equal payments, with the first installment paid at the time of purchase.
Afterward, you're responsible for a payment every six weeks. If you don't make on-time payments, you'll be subject to a $7 late fee and an additional $7 each week the balance remains unpaid. The good news is there are no interest charges for timely payments.
Zip only allows up to three installment purchases at one time.
Sezzle is a flexible BNPL service with interest-free payment. Payments on Sezzle are split into four installments, with the first payment being due upon purchase. To use Sezzle, simply download the mobile app. From there you can shop in Sezzle’s online store where you pay a 25% down payment upon making a purchase. Sezzle’s payments are spread out over six weeks, so you can give yourself extra time for making certain payments.
Splitit is a unique Buy Now, Pay Later service that uses your existing credit card (Visa or MasterCard) to divide payments into smaller payments over time. There are no applications or credit checks to use the service. Customers select “Splitit” at checkout and then can choose to divide the payment over time. Payments are split into 3, 4, 6, or up to 24 installments. At the time of purchase, the entire amount is deducted from your credit as a “pending” transaction. You are charged to the card when a payment is due. Many stores accept Splitit, and its online directory covers many different product categories.
Perpay is a BNPL app that focuses on helping individuals increase their credit scores. Perpay uses your personalized Spending Limit to sort goods in their online marketplace (over 1000 brands). When a purchase is made, the consumer can split it into small amounts and schedule a payment in accordance with their paycheck. Each timely payment can increase an individual’s credit score. If an individual uses Perpay consistently, without missing any payments, their credit score can continue to increase. Perpay allows shoppers to spread their payments across six months, divided up in accordance with their paychecks. The product will not ship until the first payment is made.
How We Came up With This List
We assessed each app based on how user-friendly it is, the number and types of major retailers supported, and whether its terms are transparent. We eliminated apps that do not offer lengthier payment terms and apps that are cumbersome to use.
Interest-free periods: Many BNPL apps offer a predetermined period of time where you won’t need to pay interest as long as you pay on time.
No hard credit check: Most BNPL apps will conduct a soft credit check that won’t impact your credit score.
Convenient: You don’t need to leave the app or the retailer‘s website to take advantage of BNPL. Plus, it’s pretty quick to complete your purchase.
High-interest rates: If you don’t pay off the balance before the interest-free period is over, you may be subject to interest rates in the double digits – it could even be higher than ones charged by credit cards.
Fees: If you fail to make a payment, you could be charged a high late fee.
You can’t build credit: Making on-time payments won’t help you build credit since they’re not reported to the credit bureaus.
Instead of using BNPL apps, you can sign up for a credit card that offers a lengthy 0% introductory APR like the Blue Cash EveryDay® Card from American Express. That way you can make purchases interest-free until the introductory period is over.
If you’re saving up months in advance, make sure to put it into high-interest savings account like Chime or the American Express® High Yield Savings Account so you can earn some money while you’re saving.
Read our reviews here:
Chime Disclosure - Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC.
1Chime cannot guarantee when files are sent by the IRS and funds can be made available.
^Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
Why was I not eligible for buy now pay later?
In some cases, BNPL apps will look at your credit history as a soft inquiry. You may also be denied based on the size or value of your online order.
What does buy now, pay later cost?
Buy now, pay later services usually don’t have any fees or markups. However, if you don’t pay for your purchases in full by the due date, you may be assessed high late fees or interest.
Can I use multiple BNPL programs?
Yes, you can, though it may be a good idea to stick with one since many popular BNPL apps partner with some of the largest retailers out there.
BNPL apps can be a great way to make purchases but it isn’t a great long-term solution if you can’t afford the purchase in the first place. If you can’t make on-time payments, it might be better to hold off on the purchase. After all, your financial health is more important.