Buy Now Pay Later

With Buy Now Pay Later (BNPL), customers can purchase a product of their liking and make payment for it in the future without any interest in the product’s original price. This is like a short-term investment. In Ecommerce, buy now pay later is becoming one of the most popular payment methods. It doesn’t affect the customer’s credit score unless he/she fails to make payment on the due date. BNPL is also using as an instalment plan for some products without any interest. This is very convenient for the customers while buying something online. However, it also has its downside.

What is Buy Now Pay Later?

It is a financial arrangement which allows user to make payment of the product they are buying on a future date. Several companies have introduced BNPL services, such as Klarna and Affirm. PayPal also introduces a point of sale instalment program. This service is also offered by some credit card companies such as American Express and Chase.

How Buy Now Pay Later Works?

Buy Now Pay Later programs are different for each company because each company’s terms and conditions are unique. However, the following are some general rules that all companies follow while offering BNPL services:

  • When you purchase from a particular retailer, you can choose Buy Now Pay Later option while checking out.
  • You have to make a down payment for your product if the BNPL option is approved for you. The down payment is generally 25% of the price of the product.
  • The remaining amount can be paid on pre-decided dates without paying any interest.
  • Bank Transfers and Cheques can also be used for payment. At the same time, the system will automatically deduct payments on the due dates if you are using a Credit/Debit card or a bank account.

In general, BNPL services don’t have any interest rate. You are told upfront how much amount you have to pay at what time, and you have to follow the deadlines then. It is like just another customer loan scheme. Most of the companies who are offering BNPL services need to check your credit score so that these companies can approve your BNPL services. This doesn’t usually affect your credit score, but some companies could temporarily knock off few points from your credit score.

However, the Covid-19 pandemic has increased the popularity of e-commerce. Hence, BNPL services are now used more often while making purchases for smaller items on e-commerce platforms. A survey revealed that 39% of Americans had used BNPL services at least once.

Buy Now Pay Later Special Consideration

Some things have to be considered before agreeing to a BNPL agreement. First of all, you must understand the terms and conditions of repayment policies that you agree to. These terms and conditions can vary from company to company. For example, some companies offer to complete your payments within a month, while others can extend this duration to 3 months, six months, or even one year. If there are any interest rates, they will also vary from company to company. You should know about the working of these payments to have a budget plan ready when the time of paying the instalment comes.

Having a planned budget will also ensure that you have finances to support your instalment payments on the due dates. If you miss your due date, it will affect your credit score, as late payment will be applied to you in such a scenario. You should know that it’s not guaranteed that you will be approved for a 0$ interest rate BNPL agreement. There can be interest rates on BNPL, which can be equal to credit cards or an increase. You won’t earn any rewards while agreeing to BNPL services as you earn from direct credit card payments.

You also should consider return policies that will work on BNPL services. The retailer may return your product, but your BNPL contract won’t terminate, and you have to make sure that if you return your product, your BNPL contract is terminated.

Pros and Cons of BNPL

BNPL allows you to pay for the products over time without paying any interest rate. It is now a stylish way of purchasing things from e-commerce platforms. Even if you are on a low credit score, you can still avail BNPL agreement, as generally, it won’t affect your credit score.

Using this service or making payments according to BNPL agreements won’t increase your credit score like other payments. Moreover, you won’t be benefiting from rewards and cash backs while agreeing to a BNPL contract. There are also complications while returning the product; the money-back process will be slow and delayed. Following is the overview of the Pros and Cons of BNPL:


  • Convenient for customers to make payments over time.
  • As compared to credit cards, it has zero or low-interest rates.
  • You don’t need to have a good/high credit score to get this service.
  • The approval process is fast.


  • It is challenging or sometimes very hard to keep track of the payments.
  • If you miss the due date of payment, it may cause you to lose points on your credit score.
  • You won’t be earning any rewards or cashback while purchasing via BNPL.
  • You still have to complete the payment process even if you have returned the item according to your BNPL agreement.


The purpose of BNPL is to make people eligible to buy products of their choice immediately, even if they don’t have enough finances to back their purchase. You will agree to BNPL services and pay the remaining amount of the product over time without any interest rates. However, different companies have different policies. To avoid any inconvenience, make sure that you understand the terms and conditions of your BNPL agreement. You don’t have to have a good or sound credit score to use the BNPL service, but late or delayed payments can cause your credit score to lose points. Making a proper budget plan will ensure appropriate payments on the due dates so that you don’t have to face many complications.

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