What is buy now, pay later?

Summary

• Buy now, pay later (BNPL) is a financing option that lets you make purchases immediately and repay the cost in fixed installments over time.
• The most common BNPL app plan is “pay-in-4,” which splits your purchase into four equal payments due every two weeks.
• Credit cards with BNPL features may offer longer repayment options, with payments shown separately on your monthly statement.
• Missing payments can lead to late fees and damage your credit score, if reported, which may make future borrowing more expensive.

Buy now, pay later (BNPL) is a type of short-term financing that lets you make a purchase and spread the cost over several smaller installments, often with no interest if you repay on time.

Imagine, for example, you need a new sofa. A BNPL plan puts it in your living room today while you pay the bill over the next few weeks or months.

How does buy now, pay later work?

A buy now, pay later plan is essentially an installment loan. You receive the full purchase amount upfront and repay it in regular fixed installments over time, often starting with the first payment at checkout, either online or in a store. However, the details can vary depending on whether you use a BNPL app or a credit card with a buy now, pay later option, like the U.S. Bank Split Card. Let’s look at a few key points in the BNPL journey to see the differences.

Getting BNPL

The first interaction many people have with BNPL is at checkout. If they opt for BNPL, they get a short application asking for their:

• Name.
• Email address.
• Date of birth.
• Phone number.
• Payment method.

Some providers may ask for a Social Security number so they can run a soft credit check before approving or denying the application.¹

The process looks a little different with a credit card. You fill out a single application, and the card provider evaluates your creditworthiness based on factors such as your credit score and income. Once approved, the BNPL option is usually available automatically, and you can choose whether to use it on eligible purchases.

BNPL repayment plans

Whether you use an app or a credit card, a purchase made with a BNPL plan splits the cost into smaller payments. The most common plan for BNPL apps is “pay-in-4.”¹ This means your purchase is divided into four equal payments due every two weeks. If you buy a $200 jacket on a pay-in-4 plan, you'd pay $50 at checkout, then $50 every two weeks until it’s paid off.

With a credit card, you may get to choose your repayment period – often three, six, or 12 months. Your monthly statement shows a separate “installment payment” alongside your regular charges. The installment is due in full each cycle until the plan ends.

BNPL costs

Interest is a key consideration with BNPL plans. Most short-term plans are interest-free as long as you make every payment on time, and some credit cards may charge lower interest for BNPL purchases. However, longer-term plans – say, in the six-to-24-month range – might charge interest immediately, just as personal loans often do.

Some BNPL credit cards charge a monthly flat fee for using the feature as an alternative to interest. For example, let’s say you buy a $600 item and split it into six monthly payments using a credit card that charges $5 per month for buying now and paying later. You’d end up paying $630 in total.

Late fees may be another concern. Depending on your provider and plan, you could be charged a fee for late payments.

You also need to keep your credit score in mind. Most BNPL providers don’t report missed payments to the credit bureaus, but your credit score may go down if your account ends up with a debt collector.² That may make future borrowing more expensive.

 

What are the pros and cons of buy now, pay later?

Buy now, pay later can be an attractive option when you’re hesitant to say yes to a big purchase, but it’s not without risks. Weighing the pros against the cons can help you decide if BNPL is right for you.

Pros

• Immediate access: You get the product right away and spread out the cost, unlike layaway, which requires you to wait until the product is paid for completely.
• Predictable payments: Installments are fixed, so you know exactly how much is due and when.
• Easier budgeting: Having a set payoff schedule may help you avoid carrying a lingering balance.
• No or low interest: Most short-term “pay-in-4” plans are interest-free if you pay on time, and credit card BNPL plans may offer flat fees or lower rates than the card’s regular interest rate.

Cons

• Potential costs: Missed payments can trigger late fees, and some longer-term BNPL plans start accruing interest immediately, often at high rates.
• Rigid schedule: BNPL has fixed installments, so you can’t adjust or defer them as you might with a credit card balance.
• May encourage overspending: Breaking a purchase into smaller chunks can make it feel more affordable than it really is.
• Potential impact on credit: Your score may take a hit if your account is turned over to a debt collector for failure to repay.

BNPL may be beneficial when used responsibly

Used thoughtfully, BNPL can be a helpful way to make purchases feel smaller, simpler and more manageable, but you need to understand the terms before you commit. Thinking about your spending habits can make BNPL a valuable tool for staying on track with your goals while still enjoying the items you need today.

Sources

¹ NerdWallet, “What Is Buy Now, Pay Later?” https://www.nerdwallet.com/article/loans/personal-loans/buy-now-pay-later/ accessed September 3, 2025.

² CFPB, “Will a Buy Now, Pay Later (BNPL) loan impact my credit scores?” https://www.consumerfinance.gov/ask-cfpb/will-a-buy-now-pay-later-bnpl-loan-impact-my-credit-scores-en-2117/, August 30, 2024/ accessed September

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