Choosing to “buy now, pay later” is an increasingly popular trend among consumers and it’s not difficult to see why. The flexibility, ease of use and convenience buy now, pay later (BNPL) services offer can make them seem like the ideal option for any purchase. But how does it work? And most importantly, is it the right option for you?
Despite the accessible nature of buy now, pay later, it’s still a form of credit that you should understand before jumping in.
In this article, we'll walk you through the nuts and bolts of BNPL. We'll explain:
What buy now, pay later is
How it works
Examples of popular BNPL services
Some positives and negatives based on real user reviews
How to decide if BNPL is the right payment method for your purchase
What is buy now, pay later?
"Buy Now, Pay Later" (BNPL) is a financing option that lets you purchase items and pay for them over a period of time. This can range from weeks to months depending on the provider. You'll make a series of equal payments, starting at the point of purchase, until the total amount is covered.
How does buy now, pay later work?
You can use a BNPL app or select the option at checkout with a participating retailer. While different providers may have different processes, typically when you select the "buy now, pay later" option, the retailer or the BNPL service provider will conduct a credit check to ensure that you can afford to pay back the money you're about to borrow. It’s worth mentioning here that while many BNPL providers do a soft credit check (meaning it doesn’t affect your credit score), some do conduct a hard check, so always do your own research on your chosen service before you move ahead.
Once you’ve been approved, you'll have to pay a portion of the total cost upfront as a down payment. The remaining amount is then divided into equal installments. These are typically due every two weeks or every month, depending on the terms of the service.
The BNPL service provider will set up automatic withdrawals from your bank account or charge your credit card for each installment when it's due.
Most BNPL services don't charge interest if you pay off your balance within the agreed-upon time frame (but again, always check first). However, some may start accruing interest after that period, and late fees may apply if you miss a payment.
Examples of buy now, pay later products
You might have heard of some buy now, pay later products like Klarna, Afterpay, Sezzle, Splitit, Zip and Apple Pay Later but there’s a whole range of BNPL options available nowadays. Whichever option interests you, don’t forget to do your research to make sure they suit your needs.
Pros and cons of buy now, pay later
Here are some of the positive features of BNPL products we spotted in Trustpilot reviews:
Immediate purchase: BNPL allows you to purchase items right away meaning you don't have to wait until you have the full amount.
Flexible payment schedules: Some reviews highlight the benefits of choosing between weekly, bi-weekly, or monthly payments, although this varies by provider.
Organization: Some reviews praise helpful payment reminders to keep things organized.
Freedom to buy: Some reviewers say that using buy now, pay later lets them budget and afford items they wouldn’t be able to purchase otherwise.
Ease of use: Many reviews mention how quick and easy it is to make purchases in this way.
Here are a few examples of the less positive aspects of BNPL mentioned in Trustpilot reviews:
Potential for overspending: The ease and convenience of BNPL can lead to impulse purchases and overspending.
Late payment problems: If you fail to make your payments on time, you could be hit with late fees, high interest rates or a reduction in the amount you can spend. Some consumers mention they were unhappy that their limit had reduced after missing a payment.
Delivery and returns issues: Some reviewers say it can be complicated making a return as there is a third party involved. Meanwhile some note that while their BNPL installments are being taken from their account, the product hasn’t arrived yet and so they don’t have anything to show for their purchase yet.
Resolving technical issues: Technical glitches can cause problems, like payments being declined or delays receiving money back. Being able to easily speak to customer service and resolve an issue quickly has an impact on consumers’ experiences according to their reviews.
Limited retailer options: Some consumers say that there is no option to use BNPL in their favorite stores.
It’s worth looking at how companies have responded to reviews. For example in response to some reviews mentioning limited retail options we saw that some companies have replied explaining that the list of businesses they work with is always expanding or asking for more feedback. Other replies give reasons for lowering a consumer’s credit amount. These replies can show you how a business resolves issues and is just one of the ways companies use reviews to get better.
How to decide if buy now, pay later" is the best option
Buy now, pay later can be a handy tool if used correctly and in appropriate situations. Here are a few things to think about as you consider your payment options for any purchase:
1. Do you completely understand the terms and conditions?
Make sure you're clear on all the details. How much will you pay in total? When are payments due? What happens if a payment is late or missed?
2. Can you comfortably afford the repayments?
Will these payments fit comfortably within your budget, or will they cause financial strain?
3. Are you making an impulse purchase?
The option of smaller payments could potentially make it easy to give into impulse buys. Are you buying something you need and planned for, or is it a spur-of-the-moment decision?
4. Is the BNPL provider trustworthy?
Do your homework on the provider. Check out reviews and ratings to ensure they have a good track record.
5. How often are you using this option?
It can help to take a step back and think about your spending habits and if they’re working for you. If you find that you’re using BNPL options more than you’re comfortable with or losing track of what you’ve paid for you might want to consider if adding more payments is a good idea.
6. What do you want to achieve?
Think carefully about why you’ve chosen to get from using this option. What’s your priority? Is affordability? Convenience? Flexibility? Are you interested in earning rewards on your purchases? Knowing what you want from your purchase method can help you decide which option is most suitable.
Bottom line
Buy now, pay later services give you the flexibility to make purchases in a way that works for you. Like any form of credit, whether it’s a suitable option for you depends on your own personal situation. By thinking carefully about your needs you can be confident you've made an informed decision.
Trustpilot is a review platform that is open to all. The companies and profile pages referenced in this article are provided for informational purposes only and are not recommended, endorsed by, or representative of the views of Trustpilot. The Trustpilot companies linked in this post are expected to abide by Trustpilot’s Guidelines, but have not been reviewed for compliance.
