What is the Difference Between Buy Now, Pay Later?
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What is Buy Now, Pay Later?
«Buy now, pay later» will divide your total purchase into a series of equal installments which will be due at checkout.
Last updated on Oct 26 2022
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Similar to the title, «buy now, pay later» lets you make a purchase and receive it right away, but pay for it at an later date, typically in a set of installments.
While this type of payment plan has been available for years, it exploded in popularity during the outbreak because more people were switching to shopping online.
It is possible to use a buy now, pay later option at a lot of major retailers, but whether you should depends on the plan and the financial circumstances.
What do you want to buy now, pay later?
Buy now and pay later, or BNPL, is a type of installment loan. It divides your purchase into equal installments, with the first due at checkout. The remainder of the payments are charged to your credit or debit card until your purchase has been paid in full.
These plans can come with fees and interest, however certain plans, based on the provider, charge neither.
You’ll come across BNPL payment plans when you shop on the internet, and several plans are offered in stores.
You can also search for and .
What is the best way to buy now and pay for later work?
At checkout, you’ll have an option to divide your total purchase and pay a smaller amount right now, instead the entire amount.
If interested, you’ll complete a brief application directly on the checkout screen. It might ask for details such as your name and email address, birth date and date of birth. phone number , and Social Security number. Additionally, you’ll need to provide an option to pay. Then, the BNPL provider will conduct an informal credit check which won’t affect your credit score. They will accept or deny your application in just a few seconds.
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The criteria for approval vary and, despite the fact that you have bad credit or none at all, you might still be eligible.
The plan you’re offered will differ from one provider to the next, but many companies use a «pay-in-four» modelthat divides the purchase into four equal installments, to be paid two weeks after the other and the first installment due right away.
If, for instance, the total amount of your purchase is $300, you’ll pay $75 at the time of checkout. You’ll then there are three more payments of $75 each, due two weeks apart. As long as you make all payments on time then you’ll have paid the purchase off within six weeks.
While a pay-in-four plan doesn’t usually charge interest, longer-term BNPL plans could be charged an annual percentage rate of up to 30 percent. Fees, like for late or rescheduled payment, vary from $1 to $10 and can be set at 25 percent of the value of the purchase depending on the business.
Should you choose to buy now and or pay later?
There are many things to think about when deciding to choose the BNPL payment plan.
NerdWallet suggests using BNPL only for essential expenses like a mattress for your apartment or a laptop computer for school. While the plan might seem simple and low-cost however, you’re taking on the burden of debt. It’s not a good idea to go into debt to finance a non-essential purchase.
It is also recommended to search for an BNPL plan that charges zero or minimal interest. This will reduce your monthly payments and make it easier for you to pay back the loan.
If you’re struggling to pay your bills or , steer clear of buy now, pay later. Due to its ease of use it’s easy to go overboard with BNPL. If that happens, you may incur charges that are excessive or be sent to collections, which will hurt your credit score.
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BNPL pros
BNPL cons
Zero-interest plans available.
There is no minimum credit score requirement.
Available at most major retailers during checkout.
Some plans may charge interest.
Some plans may charge fees.
The payment may not be disclosed to three primary credit bureaus.
It is easy to spend too much.
Limited customer service options.
For some shoppers, paying with alternative payment options like . The majority of credit cards offer cash rewards or cash rewards They also provide timely payments to credit bureaus, which not many BNPL companies are able to do. A history of on-time payments can improve your credit score and provide you with more affordable financing options in the near future.
Contrary to BNPL and other credit cards, all credit cards have a fee for interest that you are able to avoid by paying the balance every month.
The credit card industry is also controlled, which means that there are other consumer protections put in place, including more cost transparency and tighter underwriting requirements and both can keep people from overextending their credit limit.
In a sign that could indicate increased oversight of the pay now, pay later industry, the Consumer Financial Protection Bureau released a study in September, identifying several risks to the use of BNPL, including a lack of consumer protections as well as the ease of debt accumulation and the possibility of data harvesting. The CFPB states that it will continue to work on addressing these issues which could lead to more oversight of BNPL.
What apps allow you to purchase now, pay later?
partners with retailers like Amazon, Walmart and Nordstrom. While its pay-in-four plans are always zero-interest however, its monthly payment plans, which have terms up to 60 months, cost interest based the place you shop. Certain of Affirm’s partners offer no-interest rates, while others can charge as high as 30 percent APR. Affirm doesn’t charge late fees.
The company offers a basic pay-in-four-model. It is partnered with retailers like Old Navy, Gap and Bed Bath & Beyond. When you make your payment on time, there’s no additional charges with Afterpay. If however, your payment isn’t received within 10 days from the due date, you’ll be charged an amount of up to $8.
It is available at retailers like Sephora, Foot Locker and Macy’s. The pay-in four plan is also charged no interest, however if you’re more than 10 days late with your pay-in-four, Klarna will charge a late fee of up to $7.
It offers a payment plan called Pay-in-four on its website and via its mobile app at retailers like Best Buy, Target and Home Depot. The plan charges no interest or late fees.
, offered at thousands of retailers , including Target It charges no interest for using its pay-in-four plan. Though it doesn’t charge a late fee the plan will shut down your account when you miss an installment, and you’ll be required to pay a reactivation fee of $10 to be able to use Sezzle again.
, earlier called Quadpay, is available anywhere Visa is accepted by downloading Zip’s mobile application. The company charges a convenience fee for each payment the pay-in-four program and the $5, $7 or late fee of $10 for missed payments, based on the state you reside in.
APR
Terms
Fees
5.0 NerdWallet rating NerdWallet’s ratings are set by our editorial team. The scoring formula takes into account the factors we believe to be consumer-friendly, including impact to credit score, fees and rates customers’ experience, and responsible lending practices.
0%-30%.
Four installments due every two weeks; Monthly payment plans are available between 3 to 60 months.
No cost.
5.0 NerdWallet rating NerdWallet’s ratings are made by our editorial staff. The scoring formula considers aspects we consider to be consumer-friendly, including the impact on credit scores, rates and fees as well as the customer’s experience and responsible lending practices.
0%.
4 installments, due every 2 weeks.
Late fee of $8.
5.0 NerdWallet rating NerdWallet’s ratings are set by our editorial team. The scoring formula takes into account the factors we believe to be beneficial to the consumer, such as impact on credit score, rates and fees customers’ experience, and ethical lending practices.
0%.
4 installments, due every 2 weeks.
A late fee of $7.
4.5 NerdWallet rating NerdWallet’s ratings are determined by our editorial team. The scoring formula considers aspects we consider to be consumer-friendly, including the impact on credit score, fees and rates customers’ experience, and responsible lending practices.
0%.
4 installments, due every 2 weeks.
There are no fees.
5.0 NerdWallet rating NerdWallet’s ratings are set by our editorial team. The scoring formula takes into account factors we consider to be beneficial to the consumer, including impact on credit score, rates and fees customers’ experience, and responsible lending practices.
0%.
4 installments, due every 2 weeks.
No late fees.
$5 rescheduling fee.
$10 account reactivation fee.
4.0 NerdWallet rating NerdWallet’s ratings are determined by our editorial team. The scoring formula takes into account aspects we believe are friendly to consumers, such as the impact on credit score, rates and fees, customer service and ethical lending practices.
0%.
4 installments, due every 2 weeks.
$1 convenience fee per installment.
$5, $7 or $10 late fee.
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Some retailers offer different BNPL payment options when you check out. If you’re forced to choose between two or more plans generally, you should pick the one that charges zero interestbecause it’s more affordable. But make sure you can make the payments in time.
Alternatives to buy nowand later
While buying now and paying later can provide a simple and easy method to pay for a purchase, it doesn’t offer the same features like other financing options. You may want to consider these options.
A credit card with 0% interest: If you have good and excellent credit (a credit score of at least 690), you could qualify for a credit card that charges zero interest during the initial period of the credit card- usually 15 to 21 months. Credit card companies send payments to credit bureaus, which could help build your score. Additionally, you could receive an initial bonus, or gain access to an rewards program.
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Small personal loan: If you want an extended repayment time it personal loan could be the best option. Personal loans are available for people with a range of credit, and like credit cards they can be accompanied by an history of timely payments to the bureaus. There is a cost for interest with personal loan, but having a long-term contract, the monthly payment may fit more easily into your budget.
The author’s bio: Jackie Veling covers personal loans for NerdWallet.
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