“Buy now, pay later” might sound like a sketchy slogan you’d see outside a used car dealership, but it’s actually an increasingly common and convenient way to break up your online purchases.
Buy now, pay later (BNPL) apps, also known as “pay-in-4 apps,” let you divide your purchases into four interest free installments: you’ll pay 25% upfront and 25% more every two weeks until your purchase is paid off.
Unlike a new line of credit, you can get instantly approved for buy now, pay later, and if you meet the right criteria you also won’t even have to pay interest. So instead of paying $100 upfront for Airpods on Amazon, you’ll only have to pay $25 every two weeks.
An interest-free loan that you’re instantly approved for certainly sounds ideal. So, what’s the catch? How will BNPL affect your credit? Are there any hidden fees? And overall, which apps are the best?
Best Buy Now, Pay Later Apps
- Affirm: Best for big purchases and long terms
- Afterpay: Best for gift shopping
- Klarna: Best for paying $0 upfront
- PayPal Credit: Best for widespread acceptance
- Zip: Best for in-store purchases
- Sezzle: Best for payment scheduling
Affirm: Best for Big Purchases and Long Terms
- Terms: Pay in 4 installments or monthly payments in 3, 6, and 12 months
- Competitive features: High loan ceiling up to $17,500
Compared to other apps, Affirm is best-suited for financing larger purchases over a longer term.
Most BNPL apps follow a “pay-in-4” payment schedule: one payment at the time of purchase, then three more every two weeks so you’re paid up within six weeks. By contrast, Affirm has terms of 3, 6, and 12 months in addition to pay-in-4. This allows you to make monthly payments rather than bi-weekly – however you will owe interest on the longer term loans.
Another thing I like about Affirm is its massive selection of vendors. Amazon and Walmart are there, but also Tire Rack and Motorola.
Affirm doesn’t report to all three credit bureaus but they do report to Experian for some loans.
Learn more about Affirm or read our full review.
Afterpay: Best for Gift Shopping
- Terms: Pay in 4 installments
- Competitve features: Steep discounts on luxury goods
Afterpay follows a traditional pay-in-4 payment plan, charging you a quarter of the purchase price upfront, then the remaining quarters every two weeks.
Browse Afterpay’s current deals and you’ll quickly pick up on a theme: this is not exactly essential stuff. Afterpay mostly partners with luxury, lifestyle, fashion, and home decor brands. It seems mostly like a retail therapy destination, but that doesn’t mean you can’t make some essential purchases there, like business attire and exercise clothes.
Plus, I like how Afterpay has a dedicated tab for small businesses and also highlights sales and BOGO deals within its own dashboard.
Afterpay doesn’t report to any of the major credit bureaus, so this app will not help improve your credit history.
Klarna: Best for Paying $0 Upfront
- Terms: Pay in 4 installments; pay in 30 days
- Competitive features: Pay in 30 lets you defer 100% of principal for a month
Klarna is a popular app with a giant vendor list and a unique twist on the BNPL formula.
In addition to your typical pay-in-4 schedule, Klarna offers a pay-in-30 plan where you pay nothing up front, and pay your principal in full exactly 30 days later. As long as you make the full payment, Klarna charges no interest.
Pay-in-30 is useful if you’re really squeezed for cash this month but need to make a large essential purchase. For example, maybe you just got your first job out of college, and at the same time you need to buy a quality mattress. Spending a thousand bucks on a mattress is a good investment for your health and happiness, but payday isn’t for three weeks and you only have $203 in your checking account. Pay-in-4 won’t work because you’ll overdraft, but pay-in-30 is perfect.
For better or worse, Klarna doesn’t report payments to credit bureaus. That’s a lucky break if you missed payments since it won’t impact your credit score, but a bit of a downer if you pay on time since it won’t boost your credit score either.
PayPal Credit: Best for Widespread Acceptance
- Terms: Pay in full within 6 months
- Competitive features: Open a 0% APR line of credit faster than a credit card
PayPal Credit is a line of credit you open through PayPal that you can use to make multiple big purchases anywhere PayPal is accepted.
The minimum credit limit with PayPal Credit is $250, and to qualify for 0% interest for six months, each of your purchases must exceed $99.
In all honesty, PayPal Credit doesn’t make many “Best Buy Now, Pay Later” lists because of its backward approach to credit reporting. PayPal Credit makes a hard credit check upfront then never reports to the credit bureaus again. There is no scenario where PayPal Credit can improve your credit; only hurt it.
So why did I include it in this list? PayPal Credit carves a niche by offering two key advantages over both credit cards and BNPL apps:
- PayPal Credit’s advantage over a 0% APR credit card is that it arrives instantly, whereas a card could take 7-10 days to arrive.
- Compared to BNPL apps, PayPal Credit doesn’t require payments in preset installments; just 100% within six months.
Learn more about PayPal Credit.
Zip: Best for In-Store Purchases
- Terms: Pay in 4 installments
- Competitive features: Accepted anywhere Visas are accepted
Most buy now, pay later apps are designed for online purchases. But sometimes, brick-and-mortar stores offer the best deals. For example, I bought the display model of a flagship TV at Costco for half off its MSRP — can’t do that online!
Luckily, there’s Zip, quite possibly the best app for in-store shopping. Zip works a little differently from your typical BNPL app. Instead of shopping through the BNPL app like a giant online marketplace, you simply tell Zip where you are and how much you need to pay, and POOF! Zip instantly produces a virtual Visa card for use at that store.
Zip can still be used online, and is accepted anywhere Visas are accepted. It follows a strict pay-in-4 plan, but at least it will only make a soft credit check and charges no fees and no interest for on-time payments.
Sezzle: Best for Payment Scheduling
- Terms: Pay in 4 installments
- Competitive features: Ability to reschedule payments to avoid late fees
Finally, there’s Sezzle. Aside from a name that sounds like an ice cream topping, Sezzle doesn’t seem to offer much that’s unique or special among the competition. It follows the usual pay-in-4 structure and doesn’t charge interest or fees for on-time payments.
The vanilla nature of Sezzle almost caused it to fall off this list until I read the fine print. Sezzle quietly offers a single, sugary sweet feature that could make all the difference: payment rescheduling.
In short, Sezzle will let you shift back all of your remaining payments by up to two weeks. So if payment number two is coming up and there’s an issue with your paycheck, instead of payments scheduled one, three, and five weeks out, you can push them back to three, five, and seven weeks out.
You can reschedule payments up to three times per order. The first reschedule is free, and the second and third are just $5 — not bad if it means avoiding interest and late fees.
What Is a Buy Now, Pay Later App?
Buy now, pay later (BNPL) apps and services let you purchase items online and pay for them over time, typically in four interest free payments. These are usually made in bi-weekly, or monthly payments.
If you’ve bought something online recently, you might’ve already noticed a buy now, pay later option during checkout. PayPal Credit is a pretty common example.
To stay competitive, most buy now, pay later apps don’t charge interest or fees. If you buy a $100 set of Airpods through Affirm, for example, you’ll only pay four equal payments of $25. No hidden fees, no markups, nada.
How Does a Buy Now, Pay Later App Work?
In short, most BNPL apps work like this:
- Download the app and link your bank or credit card.
- Shop on Amazon, Dell, or thousands of other online stores through the app.
- Add item(s) to your cart.
- Choose the BNPL payment option at checkout.
What’s the Catch to Buy Now, Pay Later Apps?
Well, it’s all cake and roses as long as you make your payments on time. If you miss a payment, however, it’s like stepping on a financial landmine.
First, you’ll be subject to sky-high interest, up to 29.99%. Unlike a credit card, BNPL apps often charge interest on the entire purchase amount, not just your remaining balance. Plus, the app’s attempt to withdraw from your bank account may result in overdraft fees from your bank, as well.
Read more: Understanding Overdraft Protection and Fees
Next, you can be subject to late fees. These aren’t too bad, usually around $20, but they certainly ruin the whole point of the deferred payment.
Last and certainly worst, some apps may report your late payment to the credit bureaus, lowering your credit score.
In short, buy now, pay later apps are convenient but risky.
Should You Use a Buy Now, Pay Later App?
A responsible way to use a buy now, pay later app is to finance the purchase of something you absolutely need (not just want), but can’t afford yet.
For example, let’s say you need a new work laptop for $1,000. You have less than a grand in your account now, but you’ll have much more than that after your first payday. But you need a work laptop to work!
You could put it on credit, but unless you’re within a 0% introductory APR period, you’ll be charged interest at a pretty high rate.
Read more: Best Low-Interest Credit Cards
You could take out a personal loan, but you’ll almost certainly be subject to around 6% to 10% interest. Plus, the turnaround time for personal loans can take up to a week, whereas most BNPL apps will give you a spending limit instantly.
And you definitely aren’t considering getting a payday loan because they’re evil and ruin lives.
So, that leaves buy now, pay later as the best option. Still, to avoid delinquent payments and a tidal wave of fees, I strongly recommend that you
- Set up automatic payments from your bank to the BNPL app.
- Set reminders on your calendar for your upcoming payment due dates.
When Shouldn’t You Use a Buy Now, Pay Later App?
Buy now, pay later apps have drawn some scrutiny from economists and watchdog groups not just because they load booby traps full of fees, but because they encourage retail therapy and overspending.
Now, you could argue that credit cards have been doing the same thing since 1950, and that at least BNPL apps charge no interest.
But regardless of your moral stance on buy now, pay later apps, there’s one objective truth to them: if you value your credit score and hate fees, you should only use BNPL apps to finance needs that you know you can afford by the payment due date.
Here are some examples of purchases you shouldn’t put on a BNPL app. These are things you should instead pay cash for to ensure you really want it and can afford it:
- Playstation 5 / Xbox Series X / rig upgrade
- Jewelry or a new handbag
- Designer clothes or accessories
- Custom car tuning or nonessential accessories
- Non-work-related consumer electronics
How I Came Up With This List
To determine the best BNPL services, I vetted over a dozen popular buy now, pay later apps and services. The ones you see rose to the top because they scored above average in most of the following categories:
- Fees: Naturally, the first thing I looked at was fees. All apps must charge fees or interest somewhere to stay in business, so I judged them on their transparency and approach to charging their customers.
- Terms: Most BNPL services stick with the standard pay-in-4 model, but apps with more flexibility won brownie points in this category.
- Vendor Acceptance: A buy now, pay later app is only as good as the list of vendors that accept it. Each of the apps on this list has a laundry list of retail partners who play ball, where you can buy both essentials and discount gifts — not just overpriced luxury goods.
- Usability and Design: There’s no excuse these days for a confusing design or lack of optimization — the best buy now, pay later apps must be clean, intuitive, and effortless to use.
- Customer Ratings and Reviews: Lastly, nobody tells the truth quite like the app’s users. Controlling for negative reviews from users who didn’t read the fine print, are customers happy with the buy now, pay later app? Does the app score above four stars in both the App Store and the Play Store?
Alternatives to Buy Now, Pay Later Apps
BNPL services are best suited for loan amounts under $1,000 in a short frame of time, usually under two months.
If you’re looking for monthly financing of a larger purchase over a longer period of time, a personal loan is a better fit. You’ll pay at least 3% interest, but the extended-term and smaller installments may be better suited to your present financial situation than a pay-in-4 loan.
Read more: How to Apply for Personal Loans
0% APR Credit Cards
If you’re looking to finance a large purchase interest-free, or would like to put a high quantity of small purchases under a 0% APR umbrella, you might consider opening a credit card with an introductory 0% APR offer.
The advantage of a 0% APR card is that as long as you make minimum payments, you won’t pay interest on any purchase up to your credit limit for a year or more.
The downside is that opening a new line of credit negatively impacts your credit score. Especially if you keep your credit card balance close to your credit limit.
Read more: Best 0% APR Credit Cards
The Most Important Features of a Buy Now, Pay Later App
What features should you look for in a buy now, pay later app? Conversely, what “gotchas” should you avoid?
Most BNPL apps offer 0% interest some of the time. The higher your credit, the more likely you are to be offered 0% interest. However, credit scores of 600 or lower might be subject to interest as high as 30%.
Each app may view your creditworthiness differently, so the key is to pay careful attention during checkout to see your final interest rate.
Prepayment and Late Payment Penalties
Most BNPL apps will publish their late fees on their site, if any, but you should also pay careful attention to the prepayment penalties.
Even though it seems like you’re doing them a favor, paying off your loan early causes headaches for lenders since it throws off their books and can cost them interest. Therefore, even BNPL services will charge you a prepayment penalty.
Installments and Terms
Some BNPL apps let you pay back in two, four, or even 16 installments, while others restrict you to just four for simplicity.
Also, BNPL apps can offer terms as short as two weeks or as long as one year. Consider the day of the month you get paid, and be sure to choose an app that offers the flexibility you need.
Minimum and Maximum Loan Amounts
Buy now, pay later loans can range from $50 to $2,500. The average sits around $750. If you’re looking to finance a larger purchase, ensure that your chosen BNPL app can not only accommodate the amount, but will pre-approve you for it.
If you’re looking to make multiple payments on a purchase greater than $2,500, consider applying for a personal loan instead.
When all’s said and done, these apps are lenders just like banks (in most cases, they are banks). That means they’ll likely take a soft credit inquiry to approve you and set your interest rate.
A credit score of 550 is pretty much the floor for most BNPL apps. But if your credit score is below 650, you might want to consider improving your credit before putting it at risk with a high-interest BNPL app purchase.
Read more: How to Build Credit the Right Way
Some buy now, pay later apps report your payments to the credit bureaus and some don’t.
If you’re certain you’ll make on-time payments, you’ll actually want to borrow through an app that does report since it can boost your credit.
If you’re not sure you can make the payments, you probably shouldn’t borrow the money at all.
Automatic Payment Functionality
Last but certainly not least, you should ensure that your chosen BNPL app has automatic payment functionality. This is the easiest way to ensure you don’t miss a payment due to absent-mindedness.
The Bottom Line
As long as you don’t miss a single payment, and only buy things you know you can afford by the payment due dates, then buy now, pay later apps can be a safe and convenient way to make monthly installments on medium-sized purchases without interest or consequence. From the half-dozen apps highlighted above, you should be able to find one that fits your specific need.