Online shoppers now have more options than before when it comes to paying for their purchases. For example, buyers now have a variety of alternative ways to finance major purchases, such as buy now, pay later in installments, which are becoming more and more common.
These types of installment services are designed to work similarly to credit cards, allowing customers to pay for purchases over time. Some of these services will charge a flat fee instead of charging interest, while others may charge an interest rate that is much lower than a typical credit card annual interest rate or no fees at all.
If there are large purchases that you want to finance but don’t want to pay significant fees or interest, a BNPL plan may be one way to lower your financing costs. And since repayment terms and fees vary, sometimes significantly, between these services, you can find one that suits your expenses and needs. But before you get started, here’s what you need to know about BNPL installment services.
What is BNPL Installment?
From traditional loans to store financing, there are all sorts of alternative ways to pay for a major purchase. One option that is gaining popularity is the BNPL installment plan structure. From card issuer-provided solutions like American Express Pay It Plan It to third-party services like Afterpay, there are many payment plans designed to separate your purchases over time.
With this BNPL installment plan, you typically pay for your purchase in fixed, equal amounts over a set repayment period. Some services limit you to a single repayment term—for example, four payments within six weeks with Afterpay—while others allow you to choose the term that suits you best. For example, Pay It Plan It allows eligible users to choose between three different repayment periods designed to offer options for every budget.
While some BNPL installment plans charge a flat interest rate, most are designed to bypass interest with a small flat fee. Whether this commission pays the consumer or the merchant depends on the payment program.
Popular installment services
There is no shortage of BNPL installment services. Each offers its own set of repayment options, rates, fees, and effects on your credit score, so you should carefully consider each of these factors before deciding if a plan fits your budget.
Here is a brief overview of some of the most popular BNPL installment services currently available on the market.
| Payment service | Repayment terms | Interest rates and fees | Credit rating effect |
|---|---|---|---|
| Confirm | Financing terms from 3-39 months |
|
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| Afterpayment | 4 equal payments within 6 weeks |
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Does not affect credit rating |
| Klarna | Depending on the seller:
|
|
|
| QuadPay | 4 equal payments within 6 weeks |
|
Does not affect credit rating |
| Sizzle | 4 equal payments within 6 weeks |
|
|
| Bread | Depending on the seller:
|
|
|
| Share it | Equal installments over 3, 6, 12 or 24-month repayment periods |
|
Does not affect your credit score |
| American Express Pay It Plan | Pool up to 10 purchases for financing over a set repayment period (3-24 months). |
|
|
The most important thing you can do before choosing one of these installment solutions is to add the total cost of your purchase. While some of these services, such as Afterpay and QuadPay, charge no fees and can save you money over time, others can be more costly than paying for your purchase with a credit card.
Choosing the best service for you
So how do you navigate through these online payment solutions and decide which one is best for you?
In many cases, you are limited depending on the seller you are buying from. Most third-party services partner with select sellers to add your payment method at checkout, and you’ll have to stick with the option that’s available to you.
However, this is not true in all cases. QuadPay and Klarna allow users to take advantage of a payment plan that can be used with any merchant through a virtual card number. In addition, Affirm offers a virtual card for users to choose from.
| Service | Retail Partners | Examples of participating sellers |
|---|---|---|
| Confirm |
|
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| Afterpayment |
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| Klarna |
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| QuadPay |
|
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| Sizzle |
|
|
| Bread |
|
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| Share it |
|
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| American Express Pay It Plan |
|
Nobody |
Since the American Express Pay It plan is linked to your credit card, eligible cardholders can use any eligible purchases at merchants that accept Amex.
How Buying Now, Paying Later Services Can Impact Your Credit Score
Many BNPL installment services are designed to provide options for most buyers, including those with bad credit. These services will not perform a credit check to qualify you for the plan, and the plan will not affect your credit score. However, some plans require a soft or hard loan for approval, and your payments or the installment loan itself may be turned over to credit bureaus.
In turn, it is very important to make all your payments on time to avoid any negative scores on your credit history. Also, if you are inconsistent about paying what you owe, the service is unlikely to approve another payment plan for you in the future. BNPL services can be a good option for those expensive items that you need to pay for over time, but should not be used to purchase items that you cannot afford to pay for.
Tips for making the most of installment services
Once you sign up for BNPL installment financing, keep these guidelines in mind to get the most out of your payment solution.
- Don’t take on too many plans at once. While you may be able to finance many things with different plans, be careful. Accepting several smaller payments can make it hard to know how much you’re actually spending in total each month, and you don’t want to be stuck with more than you can get back.
- Know your terms. Read the fine print before accepting an offer. While you may think you’re getting a good deal, make sure you understand any penalties, such as account closures or late fees, that come with not meeting the terms and conditions.
- Always make payments on time. Any late payments you may incur when paying for an installment plan after the due date can be steep. Also, because some services report payment information to credit bureaus, these late payments can lower your credit score.
- Calculate your interest and fees. If your payment plan charges interest or fees, be sure to do the math and find out if you’re actually saving money compared to another payment method. In fact, you can save more by using a credit card, especially if you have a credit card with a 0 percent starting annual interest rate.
- Consider making payments with a credit card. You can also make installment payments with a bonus credit card if allowed by the service, which can earn you points, miles, or cashback for the money you spend on loan repayments. In addition, this way you will add a little more flexibility to your payments.
- Set up a payment calendar. You can also maintain your own payment calendar, even if you have automatic payments or due date notifications set up. You don’t want to miss a payment if something goes wrong, and a payment calendar helps you stay on track.
Bottom line
Depending on your goals, finances and other factors, BNPL installment services can be a great way to finance large purchases, usually at a low cost. However, if possible, you can ensure that you use the service with interest, fees, and repayment terms that suit your spending habits or budget and your financial goals. While it may be tempting to take advantage of the installment payment offer, it’s important to know it’s a good deal before committing to a plan.
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The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.
