Buy Now, Pay Later – What Consumers Need to Know

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Back to DFPI Consumer Resources ›› Buy Now, Pay Later

Know the downside and the upside

Interest free purchases? Great! Simple repayment terms? Super! BUT…

Cell phone with a dollar sign on the screenAs tempting as Buy Now, Pay Later (BNPL) credit sounds, never lose sight of this simple fact: BNPL plans are loans — they carry the same obligations and risks that loans do, too. Failure to repay promptly, or to repay at all, can have serious impacts on your credit and future financial health.

What are Buy Now, Pay Later Plans?

Buy Now, Pay Later (BNPL) plans are a popular alternative to buying with credit cards, especially online. These plans split the cost of a purchase into smaller, interest-free installments that you pay over time. They are often advertised as “pay in four” plans that bill equal amounts every few weeks. Simple, right?

Well, not always.

BNPL is not an installment agreement with a retailer. BNPL is a line of credit from an outside company, part of a growing, multi-billion-dollar market. This page is devoted to helping you decide when, where and how BNPL may be a good fit for your needs — and to arm you with the insights you need to avoid overextending yourself.

Arm yourself with Information

Things like interest free terms can make that special gift or purchase even more tempting. However, BNPLs tend to have fewer protections and more conditions than traditional loans or credit cards. They can have additional fees hidden in their fine print. And keeping track of payment plans and due dates can also be harder.

Consumer protection groups have identified three distinct areas of risk when it comes to BNPL credit:

  • You can get overextended: BNPL can make it to easy to get in too deep by taking the friction out of buying on credit. Easy, point-of-sale credit can lead to “loan stacking,” where you take out several loans in a brief time with multiple lenders.
  • Your data can get “harvested”: BNPL lenders often collect consumer data based on you and your spending and borrowing habits. They can then use these insights to entice you into more borrowing.
  • You can get caught off guard: Lots of BNPL borrowers get stung by convenience fees, late fees, and other conditions and requirements. Loan terms, payment due dates, and dispute resolution channels may not always be clear, and can differ from lender to lender.

Some BNPL rules of thumb:

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Limit Your Loans
A study by Consumer Reports found owing four or more loans at once makes you twice as likely to miss a payment. So limit yourself to one or two BNPL loans at a time.

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Read the Tiny Type
Don’t breeze by terms and conditions. Make sure you understand repayment terms, interest rates, and late payment penalties.

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Keep an Eye on Auto-Payments
With some lenders, you’ll be required to make auto-payments from your debit card or bank account. If that’s your situation, avoid late fees by checking your account on the first due date.

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Don’t Make Payments with a Credit Card
This is a big one: To keep from digging yourself into a hole, by all means avoid paying off your loan with a credit card.


What You Can Do

File a Report Online
If you have issues with your servicer or think that your rights have been violated, submit a complaint online, call us at (866) 275-2677 or send an email to

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Before using a BNPL plan, make sure you’re adequately informed about the BNPL service, its terms, and alternatives offered by different lenders to avoid owing more than you bargained for.

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Last updated: Mar 28, 2024 @ 10:33 am