Buy Now, Pay Later is that very exciting option that pops up when you’re buying something online and they ask you if you want to make 4 payments of $15 over a few months rather than pay $60 today. Of course, the answer is always YES! But Buy Now, Pay Later has sadly become a bit better known as Buy Now, Regret Later.

Put simply - Buy Now, Pay Later (BNPL) is debt.

BNPL is a payment method that allows consumers to purchase goods or services and defer payment to a later date. With BNPL, consumers can buy items without paying for them upfront and instead make payments over time in installments. Typically, there is no interest charged during the BNPL period, which can range from a few weeks to several months or longer, depending on the provider.

If you think about a loan, someone is giving you all the money you need to make a purchase today and you pay them back over time. BNPL is structured exactly like that except it markets itself as zero-interest. That’s not entirely true. As long as you stick to the agreed payment plan, you won’t have to pay any interest on your purchase. However, you could face late fees or an interest rate charge if you miss your payments or fail to pay off the loan by the end of its term, i.e., the date of the final payment. So make sure you make your payments on time in the right amount just like would with any other loan.

BNPL won’t help you build credit.

The best way to build credit is to build a history of making on-time payments to a lender. Since BNPL consists of multiple payments over an agreed upon period to a lender, you’d think it would help you build credit. But most BNPL lenders don’t actually report timely payments to credit bureaus, which means that making on-time payments won’t help improve your credit scores.

On the flip side, if you miss multiple payments to your BNPL lender and your account goes to collections, the information will be passed on to credit bureaus and will most likely hurt your credit score. The benefits to your credit score are pretty limited with BNPL but the risks are quite high. It’s worth noting, this is an evolving answer because credit bureaus are actively evaluating BNPL data and if they should include it in credit scores, so we’ll keep you posted if something changes!

If you budget correctly, you shouldn’t need to use BNPL.

While BNPL can be a convenient way to spread out the cost of a purchase, it can also lead to overspending and potentially add to the consumer's debt if not used responsibly. It might not seem like a big deal to make a $15 payment every few weeks as part of your installment plan. But if you have multiple BNPL agreements like this, your budget can quickly become unmanageable, with a large part of your income going to loans like these.

On the flip side though, if you have a large unexpected purchase you have to make and didn’t budget for (i.e. new laptop), then BNPL is a solid alternative to accruing interest-bearing credit card debt. If you are going to buy something with BNPL, carefully review the terms and conditions of BNPL agreements and ensure you can afford to make the required payments before choosing this option.

Peach out ✌️