What to Know About Buy Now, Pay Later Services

Buy Now, Pay Later (BNPL) services have evolved from more niche payment options to mainstream financial tools. As a result, understanding how BNPL works and how using it can impact you is more important than ever. Let's take a closer look at these popular services.

What is Buy Now, Pay Later?

BNPL is a short-term financing method that allows users to split purchases into smaller installments, often interest-free. Some BNPL platforms also offer flexible payment plans at checkout. This makes it easier to purchase and afford items without traditional credit cards.

Typically, BNPL services offer “Pay in 4” models, which means there are four equal payments due every two weeks. Some BNPL vendors also offer longer-term financing options with interest, depending on the purchase amount and user creditworthiness.

Why is BNPL so Popular?

Buy Now, Pay Later services offer convenience, flexibility, and their users the ability to avoid credit card interest. As a result, BNPL use has increased rapidly in recent years. In 2026, there’s expected to be 96 million BNPL users in the U.S., up from 91 million this year. Millennials and Gen Z are the most frequent users, with nearly half reporting BNPL usage in the past year.

BNPL vs. Credit Cards: What’s the Difference?

While both BNPL and credit cards allow deferred payments, they differ in structure and impact:

• BNPL. Fixed installment plans, often interest-free, with no hard credit checks.
• Credit cards. Revolving credit lines with variable interest rates and minimum payments.

BNPL is often easier to access, especially for those with limited credit history. However, credit cards offer more robust consumer protections and rewards programs. Looking for a credit card? Check out our Visa® credit card offerings.

What are the Drawbacks of Using BNPL Services?

Buy Now, Pay Later services can offer you convenience and flexibility. But there are some risks to using BNPL that you should be aware of.

• Encourages overspending. Easy access to deferred payments can lead to impulse purchases and poor budgeting.
• High late fees and penalties. Missing payments can result in steep fees, which quickly add up.
• Potential impact on credit scores. Some BNPL providers report missed payments to credit bureaus, which could negatively impact your credit history.
• Limited consumer protections. BNPL transactions may not offer the same safeguards as traditional credit cards for disputes or fraud.
• Debt accumulation risk. Using multiple BNPL plans at the same time can lead to a cycle of debt that’s hard to manage. 

Best Practices for Using BNPL

If you’re considering Buy Now, Pay Later services, here are some tips to use them wisely:

• Reserve for planned purchases. Avoid using BNPL for impulse buys or everyday items. Instead, use it for larger, budgeted purchases where installment payments make sense.
• Track your payments. Monitor your BNPL transactions. If needed, use a budget app to keep tabs on due dates and balances. This can help prevent missed payments.
• Limit multiple loans. Having multiple BNPL loans at the same time increases your risk of default. Try to keep it to one or two at a time to help ensure you can meet all payment deadlines.
• Set Up Auto-Pay. Automating payents ensures that you never miss a due date, protecting your credit score and avoiding late fees.

Final Thoughts

Buy Now, Pay Later services offer a convenient way to manage purchases. However, if they are not used responsibly, they can lead to financial strain. Or have a negative impact on credit scores. Before you click on, “Pay Later” when making purchases, ask yourself the following:

• Can I afford the payments without stretching my budget?
• Is this purchase necessary or impulsive?
• Will this help or hurt my credit score?

As the Buy Now, Pay Later landscape continues to grow, it will be even more crucial to make smart money decisions. While it’s tempting to use BNPL especially during the holidays, make sure you do some research and determine if it’s worth it for you.

Looking for Alternatives to BNPL? Apply for a Peak Visa Card!

While Buy Now, Pay Later services can be convenient, they might not be the best fit for everyone. For some, credit cards might be a better option. No matter where you’re at on your financial journey, we have a credit card that can work for you. Perhaps you want to build your credit, or maybe you want to rack up rewards points? Explore your options at peakcu.org/credit-cards or apply for a new card today!