Failure to pay may also result in late fees. Shoppers typically go through a simple online application process, which does not impact their credit score unless they do not make the scheduled payments. Buy now, pay later, also called installment lending, is surging in popularity as technology has made it easy to offer fast, seamless experiences in store and online.īuy now, pay later works by splitting purchases into equal payments. What is buy now, pay later (BNPL)?īuy now, pay later is a form of financing that lets consumers pay for purchases over time. The key is to think about the total cost of the purchase you are making and ensure that these tools are simply used to pay the debt over time versus all at once. And, depending on the buy now, pay later offering, if you forget to pay on time, you may incur late fees or your credit score might suffer. If you struggle to stick to a budget, these loan plans might encourage you to spend more than you should. To be sure, with any reward comes some level of risk. And these programs apply to small purchases as well as larger-priced items such as furniture, electronics or airline tickets - without onerous paperwork or wait times for approval. Also, many of these installment plans offer zero interest on purchases. For starters, the BNPL model provides the immediate gratification of receiving an item or service now, rather than waiting until the debt is paid off. It’s estimated that about a third of shoppers have used buy now, pay later financing, or BNPL, according to Credit Karma.īut these aren’t the old-school layaway plans you remember. With the rise of e-commerce, the old brick-and-mortar store layaway plans have transformed into pay-over-time models. Though shopping habits have since gone digital, pay over time plans remain a relevant tool for anyone - from the millennials and Gen Z shoppers driving the trend to older customers starting to embrace it - to practice financial responsibility. So if you paid a deposit on your new stereo system in February, you’d have it by the time Madonna released her “Like A Prayer” album in April. For years, retailers offered budget-minded consumers the option to spread out expenses by paying for big-ticket items in installments. If you’re old enough to have owned a hi-fi stereo, there’s a chance you bought it with a layaway plan.
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