Think Now, Pay Later

What to know about Buy Now, Pay Later services

The “buy now, pay later” (BNPL) option available at retailers can be quite tempting, especially during the holidays. In fact, one study of consumers who used BNPL during 2021 found that 80 percent said they’d also use this payment option during the holiday shopping season. Here’s what you need to know about BNPL before you go down that road.

It Can Hurt Your Credit Score

The majority of BNPL providers will pull your credit when you decide to use the service. They do this to see if you’re likely to meet the terms of the payment plan. A “hard pull” on your credit — the company pulls your credit report from Experian, Equifax or TransUnion — can have a negative impact on your score, regardless of if you get approved or not. Make sure you read the fine print from the BNPL provider to see if they do a hard pull.

There’s Not Much Help

BNPL services don’t offer the same consumer protections as other forms of payment, like credit cards. If you buy something with a debit card or credit card, your bank or credit union can go to bat for you should any problems arise. However, if you use a BNPL service and have an issue with the item you bought, it’s up to you to resolve it.

There Can Be High Interest

One of the reasons BNPL services are so tempting is that they don’t charge monthly interest. However, if you’re late on a payment, you will get hit with a late fee or even sky high interest charges. Before you use a BNPL, consider if it’s really a good idea. Are you okay with a credit hit? Is there a chance you could miss a payment? If the answers give you pause, it’s a better idea to simply save enough for the item and then buy it the old-fashioned way.

Chris O'Shea

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