October 25, 2021

Buy Now, Pay Later: What You Need to Know


While scrolling through social media, you see a great deal on a new gaming console. Christmas is just around the corner and this special will not last long. Unfortunately, you don’t get paid for a few days and you don’t want to hit your account with the purchase all at once.

It turns out luck is on your side! This retailer offers a buy now, pay later (BNPL) option to get what you need and not break the bank.

But what do you need to know about the third party that’s letting you pay over time? Learn more about the buy now, pay later programs on the market, and how to protect your budget.


How Does Buy Now, Pay Later Work?

Over the last few years, companies that offer payments over time like Afterpay, Affirm, and Klarna, have grown in popularity. A research study showed growth of 215% year-over-year for BNPL in the first two months of 2021.

These platforms offer a variety of payment terms and durations, but all have the same intention of helping you spread your payments over time. These companies will run a soft credit check to confirm your information.

Once approved, you can choose to link your debit card, checking account, or credit card so the app can collect the payments when they’re due. Generally, you’ll pay a portion of the amount on the day of purchase and an additional number of payments over a few months.

What is Afterpay?

As one of the most popular buy now, pay later platforms, Afterpay focuses on mobile consumers. They offer four equal payments across six weeks to lower the amount you have to pay at once.

A unique feature to Afterpay is the ability to reschedule payments within five days of the original date. Failure to pay at the scheduled time and 25% of the order value maybe be added as a late fee.

How Does Klarna Work?

Klarna offers many of the same benefits with a different approach. They offer three various forms of financing with fees charged directly to the merchant.

Customers can pay in four equal installments or choose a more extended financing option with flexible terms for larger purchases. Shoppers can also hold their payment until 30 days after receiving the item if it’s likely you’ll return the item.

What is Affirm?

Affirm stands out in their approach of buy now, pay later as one of the only platforms that offer longer terms on all purchases. The customer can choose between three, six, and 12-month term lengths.

However, they charge interest if you split the payments longer than three months. The app does show you a breakdown of the amount of interest you’ll pay by the end of your cycle.

How to Use Sezzle

Similar to Afterpay, Sezzle is another pay-over-time platform. They offer four equal payments across six weeks with no interest.

Sezzle does charge a fee for failed payment and may charge a fee to reschedule a payment. Target is one of their largest retail partners as many major retailers turn away from layaway ahead of the holiday season.


Benefits of Buy Now, Pay Later

With hundreds of retailers offering pay-over-time options, it’s hard to see the downside. Customers who use one of these services spend 18% more on purchases than those that pay at once.

These programs can help you get more items at once if you don’t have the money immediately. Customers can take advantage of sales and promotions and can pay on their schedule.

Down Sides of Pay Over Time

These programs make it much easier to overspend and harder to realize until it’s too late.
It’s easy to think that you’ll only be paying a small part of the price today, but the monthly payments aren’t as minimal if you make several purchases at a time. Ensure you know the terms you agree to before committing your money to a purchase you didn’t need.

Before choosing one of these payment options, make sure that you can afford the additional payments in the coming weeks. Plan ahead in your budget to avoid any late fees.

When used for your benefit, buy now, pay later options can help you get the most value out of what you want without the waiting game. If you’re unsure of your purchase, consider these questions before completing check out.


This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.