
Buy Now Pay Later (BNPL) Services
If you buy something online or on your mobile device, you might see the option to “buy now and pay later.” This feature allows you to buy the item right away without paying the full price upfront. These services may help break up larger payments into smaller, more affordable ones, but can also encourage excessive spending. Learn more about buy now pay later services and how they can affect your finances.
- BNPL services have become a popular online payment option that more online retailers are adopting.
- Instead of paying in full at checkout, you can make a partial payment and then repay the rest over a set period of time.
- This can help you save money in the short term, but you may incur additional fees if you fall behind on payment.
LESSON CONTENTS
What is Buy Now Pay Later?
BNPL plans are a type of installment plan or short-term financing that allows a buyer to make a purchase without having to pay everything upfront. Instead, the shopper will split up the full price of their purchase into fixed weekly or monthly installment payments until the bill is paid in full.
Third-party lenders and BNPL companies will provide this type of service to online retailers that are looking to make larger purchases more affordable. This is an appealing option to many shoppers since it allows you to split up larger purchases into smaller, more affordable payments, often interest free.
How Do Buy Now Pay Later (BNPL) Services Work?
At checkout, you may see the BNPL option when selecting a payment method. The lender will advertise their services by showing you a lower price.
Once you select this option, the company will give you a rundown of your payment plan, including how much you owe and when it is due. Your first payment may be due when you check out or within a few weeks of the purchase.
For example, if you are interested in buying an item for $50, the lender may list the price at four payments of $12.50. That means you will only be charged $12.50 now, with your next payment scheduled for several weeks down the line.
Most plans consist of interest-free installments over the course of weeks or months, which gives you more time to pay for the item in question. However, you may incur a late fee if you fall behind on payment.
You typically need to be at least 18 years old and have a bank account, credit or debit card to sign up for a BNPL plan.
Read through the terms and conditions to make sure you understand the installment plan and can afford your installment payments. Use good money management and do your due diligence by reading the section about late fees, penalties and the arbitration clause to see what happens if you can’t make a payment.
How do Buy Now Pay Later Companies Make Money?
One of the biggest draws of using a BNPL service to pay for your purchase is that you’re not charged interest on your installments.
You may be wondering how the BNPL companies make money if they don’t charge interest. The way that BNPL companies make money is by charging the retailers or merchants fees for processing the payment.
This is already a common practice for credit card transactions, where the credit card companies will charge the merchant 1%-3% of the purchase price. BNPL companies usually charge more for their services, ranging from 4%-9% per transaction.
While the cost may be higher than other payment methods, retailers may be willing to pay more for this method if it brings in new customers that wouldn’t have bought the product if they had to pay it all upfront. Some merchants may also be passing on a portion of this added cost to the consumer by raising their prices.
Is It a Good Idea to Buy Now Pay Later?
Buy now pay later services can help you buy the items you need now instead of waiting until you have more money in the bank. This can be a lifesaver if you need something right away, such as supplies for work, childcare equipment and other large consumer purchases that can’t wait.
Buying now and paying later can also help you preserve your savings in case of an emergency. You can keep more money in the bank in case you need to purchase more items or pay your bills in the near future. If you are having trouble paying your bills, you can sign up for an installment plan to save money now so you can pay off the debt with interest in time.
However, when using BNPL services, you need to make sure you can afford the installment payment. Make sure you can still afford to pay your bills and other essentials, like housing, utilities, transportation and food.
BNPL services may be difficult to track if you use them across multiple purchases. This could lead to you having multiple auto drafts from your bank account or credit/debit cards, adding up to a significant amount every month.
Installment plans tend to be common for non-essential items like luxury clothing, electronics and furniture. If you don’t need this item and can’t afford to pay for it outright, consider waiting until you have more money in the bank.
Taking out an installment plan isn’t the same as applying for a loan. Most installment plans don’t require a hard credit inquiry, which can lower your credit score. Some plans may do a soft credit inquiry to help determine eligibility.
However, more credit reporting agencies say they will start adding BNPL services to consumer credit reports. If you fall behind on your installment plan, it may be sent to collections, which will likely have a negative effect on your credit score.
You may also have trouble returning the item in question if you bought it through a BNPL service provider. Double-check the retailer’s return policy to see if you can still return the item if you aren’t happy with your purchase.
These loans may not have the same protections as credit cards and personal loans. You may still be on the hook for payment even if the item turns out to be defective or a scam.
New installment plan providers are popping up all the time, and some may be more trouble than they’re worth. Research the lender in question to see if they have a good reputation when working with consumers and retailers.
Online shopping is easy and convenient, and you’re bound to see buy now pay later services just about everywhere you go online. BNPL services can help you make large purchases more affordable but can get out of hand if not managed correctly. Be responsible with your BNPL purchases and make sure that you’re not over-extending your budget.
Related Resources
View AllHow to Budget as a College Student
Every semester delivers the same double punch: a tuition bill larger than last term and a flood of incidental costs — textbooks, lab fees, late-night pizzas — that evaporate paychecks and loan disbursements at dizzying speed. The average college student spends $38,270 per year on tuition, books, supplies, and daily living expenses. In a private campus, that bill rises to $58,628 (Hanson, 2025). When numbers grow that large, hoping for the best is not a plan; a written budget is. This guide offers a practical roadmap for how to budget as a college student—from mapping cash flows, choosing tracking tools, and cutting expenses without trimming the joy out of campus life.
How to Start Saving Money: Clever & Easy Steps
If you vowed this is the year you get ahead financially only to watch payday deposits disappear, you’re not alone. Gillespie (2025) notes that 59% of Americans still can’t cover a $1,000 emergency without borrowing or selling something. Meanwhile, the U.S. personal-saving rate is languishing below 4 percent—about half its long-term average (BEA, 2025). These sobering numbers explain why learning how to start saving is so critical. The encouraging news? A few clever ways to save money can transform vague intentions into steady progress.
How Can I Save Money? Here Are 10 Easy Tips
How can I save money? Picture your money as water flowing through a series of channels. Some streams nourish long-term goals, others evaporate into impulse buys, and a few leak through cracks you never noticed. Redirecting enough of that flow toward the bucket that matters most — savings for emergencies and retirement — guarantees long-term security. Savings protect your future. Yet the typical American household saves just 3.9 % of disposable income as of March 2025, roughly half the pre-pandemic norm (St. Louis Fed, 2025). The good news is that small, deliberate changes can double or triple that rate without feeling like deprivation.
Below, you’ll find proven, beginner-friendly money saving strategies you can start on today. By the end, you’ll have a clear map of ways to save money, from the daily latte decision to bigger moves like automating transfers or picking a side hustle.
Summer Vacation Ideas on a Budget
Rising airfares or tight budgets don’t have to cancel summer fun. A thoughtfully planned summer vacation on a budget can restore energy, create memories, and leave room in the checking account for next semester’s textbooks or an unexpected flat tire. Let’s nail down the numbers and map out low-cost destinations and close-to-home adventures. We also outline painless saving tricks and digital tools that track every dollar and make family summer vacation ideas on a budget a practical reality.
How to Become Financially Independent
Financial independence (FI) isn’t a distant fantasy reserved for trust-fund heirs or Silicon Valley founders. Instead, it’s a math-driven destination you can plot on a timeline — then march toward with deliberate choices every payday. In plain terms, financial independence means having the freedom and flexibility to make choices that align with your goals - without constantly worrying about money. It’s about feeling secure and confident in your day-to-day life and your future. In the next few minutes, you’ll learn the core habits, sequential steps, and digital tools that turn that definition into reality. By the end, you won’t just understand how to become financially independent; you’ll know which actions to take.
Can You Pay Rent with a Credit Card?
Can you pay rent with a credit card? Short answer: yes. Absolutely, but only if your landlord or a third-party processor will take the plastic and you are prepared to shoulder—or cleverly avoid—the fees. Roughly 22% of U.S. renters already put monthly housing costs on debit or credit cards, according to a 2024 payment-trends study by property-tech firm Zego (Salmonsen, 2024). That slice is growing because tenants want smoother cash flow and richer rewards, while landlords crave on-time payments. Still, every swipe passes through a maze of surcharges, interest rates, and utilization limits. Before you tap “Pay,” you need a plan to ensure you have a smart credit card management strategy in place.
Is it Wrong to Let Someone Use Your Credit Card?
When someone you trust — a spouse, adult child, sibling, or close friend — asks to use your credit card, the request feels innocent. Maybe it’s for groceries, a plane ticket, or an emergency car repair. But even with the best intentions, lending your credit card can end up with disastrous consequences. So, you might be asking, is it wrong to let someone use my credit card?
The short answer: Yes, it can be wrong — legally, financially, and ethically — depending on the circumstances. Even if you trust the person, the risks often outweigh the convenience. Below, we unpack the hazards, the narrow circumstances when sharing your credit card can work, and safer alternatives that protect you.
Improving Your Debt-to-Income Ratio
In Q3 2024, Americans spent 11.3% of their disposable income on household debt payments (St. Louis Fed, 2024). Still, some households suffer massive debts, using over 50% of income to service debt. When your debt payments consume too much of your monthly income, lenders view you as a riskier borrower. This results in unfavorable loan terms, higher interest rates, or loan denials.
Understanding how to improve your debt-to-income ratio helps you qualify for better financing options. In simple terms, your debt-to-income ratio (DTI) computes the percentage of your income that goes toward paying debts each month. In this article, we’ll explain how to compute your DTI ratio, what is a good debt-to-income ratio, the best debt-to-income ratio for various loans and strategies for lowering it.
What Is Cash-Out Refinancing?
What is cash-out refinance? It is a mortgage option that lets homeowners replace their existing home loan with a new one and, in the process, convert a portion of their built-up home equity into cash. In other words, if you have substantial equity in your property, you can refinance it for a loan amount that exceeds what you currently owe. The difference between the new loan’s principal and your remaining mortgage balance is then disbursed to you as a lump sum of cash.
A cash-out refinance can be a powerful way to consolidate debt, fund home renovations, or address pressing financial needs. Moreover, mortgage refinance rates are often lower than those of credit cards or unsecured loans. So, how does a cash-out refinance work? Read on for details and the pros and cons.
How to Use Personal Loans for Debt Consolidation
You may find yourself overwhelmed by multiple high-interest debts and unsure how to regain control. One way that has helped many people simplify their finances is using personal loans for debt consolidation. This article will provide actionable advice to help you consider whether personal loan debt consolidation might be the solution you need.
How to Use Personal Loans to Pay Off Your Debt
Have you been wrestling with multiple credit card balances, medical bills, or other high-interest obligations? Do you wonder if there’s an easier way to get control of your payments? That’s where personal loans to pay off debt come into play. Essentially, you use the funds from a single loan to consolidate debt, leaving you with one monthly payment instead of several.
If you are ready to take control of your finances yet unsure where to start — this guide is for you. We explain the pros, cons, and application steps so you can decide if using a loan to pay off bills makes sense. Let’s dive in.
How to Apply for a Credit Union Personal Loan
Do you need funds for home improvements, debt consolidation, or an emergency? If so, your top priorities must be a trusted lender and reliable guidance on how to apply for a personal loan. Credit unions offer competitive rates, clear terms, and a supportive member experience. In this article, you’ll learn what steps to take before you apply for credit union loan financing, what documents are required, how the online application process works, what approval criteria look like, and how to manage your loan responsibly afterward.