Buy Now, Pay Later: What to know before you sign up

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If a predatory, high-interest credit card and an old-fashioned layaway plan had a child, it might look like Buy Now Pay Later (BNPL).

If you are shopping online or even in certain stores these days, there are things you should know about Buy Now Pay Later plans, including that it may be difficult to return anything you don’t want or that’s defective. (This issue, however, is expected to change soon.)


Buy Now Pay Later is another chapter in the book of “How Companies Lure in New Customers.” For example, when homeownership reached its natural capacity more than two decades ago, banks just created more customers by lowering lending standards. You could be unemployed with no down payment and qualify for a huge home loan. Even pets were getting pre-approved loan offers. Thus the mortgage meltdown that started in 2006.

Now here we are with merchants trying the last couple of years to figure out how to create more customers, especially after COVID closed many stores and malls for months in 2020. Buy Now, Pay Later is a little like those 24-months-same-as-cash deals, but there’s no minimum credit score to quality. And you get far, far less time to pay the debt off.

Yes, Buy Now Pay Later is a debt. Most major retailers offer BNPL these days, sometimes for purchases as little as $30. You can actually divide up $30 into four easy payments of $7.50 each. Just about everyone can afford $7.50 every two weeks, right?

With higher inflation and tighter budgets for many this holiday season, it’s likely that more consumers will consider Buy Now Pay Later offers, many without fully understanding them. 

It works like this:

  • You make a purchase and agree to pay off the bill in four installments over six weeks.
  • You make the first payment at checkout using a debit or credit card.
  • The remaining three payments will come every two weeks, whether you have the money in your checking account or available on your credit card or not.
    If it’s “or not,” be prepared for possible overdraft or overlimit fees of $30 or more.

There can be fees and/or interest, sometimes even if you make all of your payments on time. Best case scenario: You pay it off on time with no fees and don’t need to return the item.

Shoppers run into problems when there are terms and conditions they didn’t read or understand, or when they make several purchases using BNPL and haven’t budgeted to juggle all of the payments that are lined up like planes on an airport runway. 

And then there are the consumer protections you’re forgoing by not paying with a credit card to begin with. When you pay with a credit card, you’ll get at least three weeks to pay the bill, even if your statement cuts the next day. If your billing cycle ended the day before, you’ll get seven weeks to pay with no interest or fees.

Many consumers manage BNPL fine, particularly if they have only one or two transactions they’re juggling. But it can take a lot of time to track the pending payments. And you need to hope the item isn’t defective or that the recipient of the gift doesn’t want to return or exchange it. You may not be able to get a refund or an exchange, no matter the reason.

See our tips guide for other information you should know BEFORE you Buy Now, Pay Later.

Links to our other work on Buy Now, Pay Later:

Read our report on Buy Now Pay Later complaints

Should you Buy Now and Pay Later?

Buy Now Pay Later Firms Face Reckoning


Teresa Murray

Consumer Watchdog, U.S. PIRG Education Fund

Teresa directs the Consumer Watchdog office, which looks out for consumers’ health, safety and financial security. Previously, she worked as a journalist covering consumer issues and personal finance for two decades for Ohio’s largest daily newspaper. She received dozens of state and national journalism awards, including Best Columnist in Ohio, a National Headliner Award for coverage of the 2008-09 financial crisis, and a journalism public service award for exposing improper billing practices by Verizon that affected 15 million customers nationwide. Teresa and her husband live in Greater Cleveland and have two sons. She enjoys biking, house projects and music, and serves on her church missions team and stewardship board.