Buy Now, Pay Later plans: Tips to avoid the pitfalls

Here are some tips to avoid the interest and fees that often come with these “deals.”

By Hannah Rhodes and Teresa Murray, Consumer Watchdog team

Complaints are soaring about the “Buy Now, Pay Later” financing schemes that businesses increasingly are offering as an alternative to up-front payments in full. Consumers making purchases as small as $50 online are often offered these payment plans, which can turn into debt traps. Here are some tips to avoid the interest and fees that often come with these “deals.”


Do your homework before agreeing to a “Buy Now, Pay Later” program. This means reading the terms and conditions. If you don’t want to take the time to read the fine print, you shouldn’t agree to the payment plan.

Understand the way BNPL plans usually work. Purchases are generally split into four payments, with the first due at checkout. The other three payments are typically due every two weeks and are billed to a credit card, debit card or bank account that you provided at the outset. This means you’re entering an agreement for the privilege of paying for something over as little as six weeks.

Realize that some BNPL programs charge interest, although most don’t if you make your payments on time. If you’re late on a payment, some charge late fees. In some cases, you may have to pay interest not just for one month, but for the duration of the repayment period.

Be sure you always have adequate funds in your accounts to make BNPL payments. The BNPL payments may fall at different times of the month from your regular credit card statements, so be sure to budget appropriately!

Realize that BNPL plans don’t offer the federal protections that come with purchases you make by credit card. If an item purchased with BNPL is faulty, lost or stolen, that does not mean you will have protection against having to repay the BNPL loan. The federal government offers that safeguard for credit card users.

Understand you are not guaranteed a refund. If you want to return a product you bought with BNPL, you may not be able to get a refund. Look at the fine print to find out whether refunds are available. 

Know that most BNPL programs don’t report your dealings to the credit bureaus that determine your credit score. If you’re looking to build credit, there are better avenues, such as a secured credit card, rather than purchasing products with BNPL. 

When agreeing to BNPL company terms and conditions, you may be agreeing to having personal information shared with third parties. It’s understandable that BNPL companies can share your information with debt collection companies, but they may also share it with other third parties, such as Google, if you decide to track packages through their apps. Again, read the fine print!

Don’t get caught up in the ability to spend. Just because you can afford the first payment for a BNPL purchase doesn’t mean you can afford them all. And, if you make more than one purchase through BNPL, multiple BNPL payments can start to eat up your spending for the month and it can become confusing about when which payments are due. 

Consider whether you can delay the purchase until you have the money. Will paying for something over six weeks really help you?It’s always best to pay for items outright rather than be subject to interest and late fees.  


Read our report on Buy Now Pay Later complaints