In recent years, “buy now, pay later” (BNPL) services have surged in popularity, enabling you to split purchases into smaller, interest-free payments over time. Prominent online providers have made BNPL options available for everything from clothing and electronics to flights and groceries. However, as this modern twist on layaway becomes more prevalent, it’s essential to consider both the pros and cons of buy now, pay later services in relation to your financial well-being.
The Pros of Buy Now, Pay Later
1. Immediate access without full payment upfront.
BNPL makes it easy for you to get the products you want now without paying the full amount at checkout. This can be particularly helpful for essential or time-sensitive purchases when funds are temporarily low.
2. Interest-free payments (usually).
Most BNPL services offer interest-free installment plans. If you make payments on time, this can be a more budget-friendly alternative to credit cards, which typically charge interest from the billing cycle onward unless the balance is paid in full monthly.
3. Simpler approval process.
Unlike traditional credit products, BNPL services generally don’t require a hard credit check, making them more accessible to people with limited credit histories or lower credit scores. A quick refresher: A soft credit check is not reported to the credit bureaus and does not affect your credit score. A hard credit check is reported to the credit bureaus and may lower your credit score.
If you’re not certain of your credit score, you can check it monthly for free without a hit to your credit score using our Tulee digital banking platform.
4. Transparent terms.
BNPL platforms often provide clear terms upfront — the number of installments, payment schedule, and any potential late fees. This transparency enables users to make informed decisions. That said, there’s a lot of information about these services you won’t find on their home page. Be sure to dig deep into their site to learn about fees, payment options, returns, and other details that can impact your finances.
5. Budgeting help for smaller purchases.
If you’re disciplined, spreading out a modest expense over several pay periods can make budgeting easier without taking on long-term debt.
The Cons of Buy Now, Pay Later
1. Encourages impulse spending.
One of the biggest criticisms of BNPL is that it may lead to overspending. The option to delay or split payments can make items seem more affordable than they are, tempting you to make purchases you wouldn’t otherwise consider.
2. Potential for debt accumulation.
Because BNPL loans are easy to obtain and often don’t require rigorous financial vetting, you can end up juggling multiple payment plans, leading to financial strain — especially if payment dates are forgotten or if you lose income unexpectedly.
3. Late fees and penalties.
While BNPL plans are presented as “interest-free,” missed or late payments can trigger fees and even hurt your credit in some cases. Some providers report delinquent accounts to credit bureaus, which can impact your long-term financial health. The amount of time you have to pay for your purchase could be significantly shorter than with a credit card. People have reported being charged interest on their entire purchase amount if they send in one payment late, which can significantly increase the amount paid for the item.
4. You may have to pay interest.
While many of the BNPL services do not charge interest if you pay off the amount in 4 payments, if you choose a longer term, you may be charged interest. We’ve seen rates as high as 36% APR!
5. Limited consumer protections.
Unlike credit cards, which offer fraud protection and dispute resolution under federal law, BNPL services may not always provide the same level of support if a product is defective or an unauthorized charge occurs.
6. Can impact credit if misused.
Though many BNPL providers don’t do a hard credit pull initially, some have begun reporting usage or delinquencies to credit agencies, meaning a missed payment could negatively impact your credit score.
Credit cards vs. BNPL: A few more things to consider.
While BNPL services offer convenience and budgeting flexibility, traditional credit cards still hold important advantages. Credit cards offer broader fraud protection, facilitate dispute resolution under federal law, and often come with rewards programs, travel perks, and cash-back offers. Additionally, responsible use of a credit card can help build credit over time, unlike most BNPL services, which typically do not report positive payment history. For consumers with disciplined spending habits, a well-managed credit card may offer more long-term financial benefits than a BNPL plan.
If you’re using a BNPL plan instead of a credit card due to high interest, consider this: We’re offering a 0% intro APR* on select Credit Cards for the first six months after opening a card. And when you spend $5,000 in the first three months, you’ll receive a $100 statement credit. Our cards offer cash back, points, and rates as low as 8.99% APR. Applying online is easy.
Final Thoughts.
Buy now, pay later services can be a helpful tool for managing cash flow or handling unexpected expenses. But, like all financial products, they come with responsibilities. You should treat BNPL plans like short-term loans, not free money. Used wisely and sparingly, they can support smart budgeting. Used carelessly, they can become a debt trap in disguise.
The key is to understand the terms, assess your ability to repay, and resist the temptation to spend more than you can afford — because, in the end, you will have to pay later.
*$100 Bonus for New Credit Cards for: Crystal Visa, Select Visa & Visa Platinum: A $100 (one hundred dollars) bonus will be paid in the form of “Visa Statement Credit” when at least $5,000.00 (five thousand dollars) is spent in purchases within the first 3 months (qualifying period) of the “New” Visa card opening. Bonuses will be paid out within 90 days after the qualification period. Example: If a card is activated on January 1, 2021 and the total of qualifying purchases for the months of January, February and March is at least $5,000, the primary borrower will receive a Bonus of $100 (one hundred dollars) no later than July 1, 2021. Limit of one reward/bonus per member number. Qualifying transactions must “post” to the designated account during the qualified period. All qualifying purchases will count towards the $5,000 in spent purchases unless return for credit of any of the qualifying transactions takes place within 90 days of the end of the qualifying period. Transactions may take two business days from the date of purchase to post. Member must be in good standing to be eligible for bonus. New accounts are subject to FIGFCU approval and all other terms and conditions apply. This offer is valid only for individual account /card holders, is non-transferable and cannot be combined with any other offer. The $100 Bonus is a product promotion sponsored by FIGFCU and may be discontinued at any time. Visa is a registered trademark.
Zero Percent (0%) Introductory Rate Promotion for purchases, is offered for new FIGFCU Visa Platinum ® Credit Card account holders. This incentive offer, is not available to those members who are opening a new Platinum Visa® and had an outstanding balance or a closed FIGFCU Zero Percent Loan account and/or had any FIGFCU Visa® Credit Card within the last year. If you are in an introductory rate promotion period, you are not eligible to transfer other loan balances, line of credit balances, credit card account balances or CASH Advance to take advantage of the introductory rate promotion.
Select Visa® Zero Percent (0%) Introductory Rate Promotion for purchases, is offered for new FIGFCU Visa® Select Credit Card account holders. This incentive offer, is not available to those members who are opening a new Select Visa and had an outstanding balance or a closed FIGFCU Zero Percent Loan account and/or had any FIGFCU Select Visa® Credit Card within the last year. If you are in an introductory rate promotion period, you are not eligible to transfer other loan balances, line of credit balances, credit card account balances or CASH Advance to take advantage of the introductory rate promotion. For full disclosures visit, figfcu.org/select-visa.
Blue Visa is a Share Secured Credit Card requiring deposited funds to be placed on hold with the Credit Union. Your Account is secured by the designated shares you have in a share account, be it an individual or joint account. These pledged shares will secure your account. You may not withdraw amounts that have been specifically pledged to secure your Credit Card Account until the Credit Union agrees to release all or part of the pledged amount.
APR = annual percentage rate. Rates include discounts for Direct Deposit into a Farmers Insurance Federal Credit Union Checking Account and Automatic Payment/Folio Deduction. Rates are subject to change at any time.
The balance transfer amount from other Farmers Insurance Federal Credit Union credit cards will retain its current rate (i.e., Visa Select at 8.99%, Visa Platinum at 10.99%, until the transferred balance is paid off. APR=Annual Percentage Rate. Rate quoted is the lowest rate possible for qualified borrowers and is subject to change. Qualification is based on credit history, debt, and the ability to repay. Your rate may vary. All loans subject to credit approval. The newly opened Credit Union credit card’s rate will only apply to new transactions. Any balances on the previous Credit Union credit card must be paid off at the prior credit card’s rate.
Crystal Visa® Zero Percent (0%) Introductory Rate Promotion is offered for new FIGFCU Crystal Visa® account holders. If you are in an introductory rate promotion period, you are not eligible to transfer other loan balances, line of credit balances and credit card account balances to take advantage of the introductory rate promotion. For full disclosures, visit figfcu.org/crystal-visa.
