5 Best Buy Now, Pay Later Options

“Bargain today, bills tomorrow” is essentially the mantra of the “buy now, pay later” (BNPL) services that have been sweeping the retail world. These services break down the total cost of a purchase into more manageable monthly payments, making pricier items seemingly within reach. 

BNPL services can provide a convenient way to manage the cost of a big-ticket item, but it’s crucial to understand their implications before you click that ‘buy now’ button. Just because you can buy something doesn’t mean you should.

Understanding ‘Buy Now, Pay Later’

BNPL services have seen a significant uptick in popularity recently. They allow consumers to purchase items immediately and then pay for them over time, typically interest-free if paid within a specific timeframe, usually two to four weeks or a few months, depending on the terms. 

Here’s how the process usually works:

• Checkout: When you’ve finished shopping, go to the checkout and select the BNPL service as your payment option.
• Quick Application: You’ll need to provide some personal information, such as your name, date of birth, contact information, and sometimes your Social Security number. The service will use this information to perform a soft credit check – this typically doesn’t impact your credit score.
• Instant Approval: Decisions are often made in seconds. If approved, you’ll see the total cost of your purchase broken down into smaller, typically equal payments.
• Payment Schedule: The total purchase cost is divided into a series of installments, usually spread out over a few weeks or months. The first payment is often due at the time of purchase, with subsequent payments due every two weeks or once a month, depending on the provider.
• Automatic Payments: These installments are usually set to be automatically debited from your linked bank account or credit card on the due date, so you don’t have to remember to make payments.

Below are five companies leading the way.

1. Affirm

Pros: Affirm offers real-time decisions during checkout and ensures transparent pricing with no late fees or prepayment penalties. They offer a range of repayment plans, from one month up to 48 months, depending on the retailer.

Cons: Interest rates can be high, as much as 30% APR, depending on your credit. Although they promise no hidden fees, interest charges can add up over time.

What sets them apart: Affirm partners with hundreds of retailers, making their BNPL service available on numerous websites, and offers long-term payment plans.

2. Afterpay

Pros: With Afterpay, payments are split into four equal installments due every two weeks, and you’ll pay no interest if payments are made on time.

Cons: Late fees can add up if you miss a payment, and your account will be frozen if you have an outstanding balance, preventing further purchases.

What sets them apart: Afterpay offers an app that allows you to shop directly from your favorite stores and manage all of your payments in one place.

3. PayPal

Pros: If you’re already a PayPal user, using their BNPL option is seamless. Payments are split into four interest-free payments over six weeks.

Cons: It’s only available on purchases between $30 and $600. Like other services, late fees apply.

What sets them apart: PayPal’s widespread acceptance at online stores around the world makes it a flexible option.

4. Splitit

Pros: Splitit allows you to use your existing credit card to split payments, helping you to leverage your available credit without incurring interest as long as you pay off your credit card balance.

Cons: You must have enough available credit on your card to reserve the full purchase amount, which could tie up your line of credit.

What sets them apart: Unlike most BNPL services, Splitit doesn’t require a credit check, as it works with your existing credit card.

5. Sezzle

Pros: Sezzle breaks down purchases into four payments over six weeks without interest. It also offers a program called Sezzle Up that reports your payments to credit bureaus, potentially helping to improve your credit score.

Cons: Sezzle has late payment fees, and not all retailers accept it.

What sets them apart: Sezzle’s credit-building feature sets it apart from many other BNPL services.

The Bright & Flip Side of BNPL

3 Alternative Options

Before you opt for BNPL, consider these alternatives.

1. Save Up

In a world where instant gratification is often the norm, the idea of saving up cash for a purchase might seem antiquated. Good old-fashioned saving can ensure you buy what you want without ending up in debt. 

Saving up for a purchase forces you to live within your means. It encourages thoughtful spending and helps prevent impulse purchases you might regret later.

The process of saving instills discipline and patience, fostering healthy financial habits. These habits can benefit you in the long term, helping with larger goals like saving for a home, a car, or retirement.

The process of saving and anticipation can lead to a greater appreciation of the item when you finally make the purchase. It may take longer, but your future self will thank you.

2. Use a Credit Card

A credit card can be a smart way to make large purchases if used responsibly. You can still make a purchase immediately and pay later, and you can avoid interest charges if you pay your balance in full before the due date. 

Responsible credit card use can help you build a credit history, which is important for things like getting a personal loan, renting an apartment, or even landing a job. And many credit cards offer rewards programs, such as cashback, points, or airline miles, which can provide real value.

Look for a card with a low APR.

3. Installment Loans

Installment loans can offer several advantages over BNPL services. They often allow for larger amounts, making them a better option for more significant expenses or purchases, such as home renovations or emergencies.Likewise, installment loans usually offer longer repayment terms – several months to several years – providing more time to repay the borrowed amount. And if you have good credit, you can usually secure a personal loan with a lower interest rate than most BNPL services, especially if those services charge interest.