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Person Looking at Phone Buy Now Pay later App

Navigating Buy Now Pay Later Apps

03.28.2024 / Sarah Maher - Vice President Payments
Financial Well-being
Everyone can picture this scenario: the highly anticipated release of the newest iPhone has you so excited – but there’s just one problem: payday seems so far away, and the hefty price tag is not in your budget. 

Suddenly, a service grabs your attention – with an offer that seems almost too good to be true – purchase that brand new phone in 4 installments with 0% interest. No hefty price tag up front, and you receive the item immediately. It sounds like a great deal. But is there a real hidden cost of choosing to pay in installments with a buy now, pay later (BNPL) service or app? 

While online shopping, you have undoubtedly seen a variety of Buy now, pay later apps – Affirm, Klarna, Uplift, Afterpay, Paypal, Zip, Sezzle, have dominated the BNPL landscape. In just the last few years, BNPL service usage has increased rapidly, with CNBC reporting 43% of Americans using a BNPL service in 2022, up from 31% in 2021. In this article, we want to review the pros and cons of using these services, so you can be an informed consumer. 

Understanding BNPL

Buy now, pay later services provide the purchaser with an installment loan, breaking down a sizeable payment into smaller, more manageable payments, ensuring the consumer can receive the product or service immediately. 

This short-term loan has fixed, set payments with little to no interest, ensuring the purchaser pays for the item within a few weeks of months. This is also called a point-of-sale loan, specifically, an unsecured loan. It is easy to see why it’s popular – no collateral is required and with rising inflation costs, buy now, pay later option is expanding at a wide variety of retailers.

Rising Popularity

BNPL service users tend to be millennials and younger. Insider Intelligence has found that nearly 75% of individuals who use these services are Millennials or Gen Z, with Millennials taking up the greater share. 

This study also found users top items for these apps spans electronics, furniture, appliances, as well as smaller and less costly items, such as shoes, clothing, and music. In 2023, more than 60% of Americans live paycheck to paycheck, including those who are in a high income bracket. Breaking up payments with rising inflation and the current economic climate, it seems like a good option for many. Let’s explore the benefits of using a buy now, pay later service. 


Immediate Purchasing Power 

Instead of having to save over the course of a few months to make the purchase of an item, you can purchase items immediately. Due to the very cursory credit check before you are granted the usage of these BNPL services, you have nearly immediate access to goods and services. This can be helpful if you are in immediate need for expenses that you can’t plan for, such as broken appliances or electronics. 

Flexible Payment Schedule 

The flexible payment schedule is a positive draw for many individuals. The Consumer Financial Protection Bureau states that buy now, pay later services usually require little or no initial payments, and pay off the balance over four or fewer payments. Although the timing of the payments is generally rigid, you have more time to save for the item when paying in increments. Compared to purchasing a big-ticket item with a credit card, it might be worth it to explore using a BNPL app to avoid the interest fees. 

Easy Approval 

Buy now, pay later services are gaining popularity due to their easy approval process. The New York Times explored how these apps are not highly regulated and only provide a cursory credit check. Sometimes, they don’t require a credit check at all. 

This is a great option for those who are younger and haven’t had a credit score yet, those consumers who have poor credit scores, or just those who want to quickly qualify for the simplest way to buy. While these positives may seem unbeatable, there are also some other, possibly negative factors to consider before selecting a BNPL app for your next purchase. 


Possible Credit Score Impact 

A significant drawback to using buy now, pay later is your credit score can decrease if you miss a payment. Make sure you can pay the item back on time before you consider using this option. Build the set payments into your monthly budget and set a reminder, so you don’t miss a payment. 

Think that missing one payment won’t hurt your credit score? On the contrary, there is a very high chance lapsing on just one payment can negatively impact your credit score. According to a study by Kredit Karma, 73% of respondents who missed a BNPL payment have reported seeing a decrease in their credit scores afterward. 

An important tip to keep in mind: if you make your payments on time, using a buy now, pay later app will not help your credit score, but it will remain the same. Ensure that you can complete the payments on time to protect against potential negative credit score impact. 

Hidden Fees for Late Payments 

Certain buy now, pay later services charge up to 25% of the loan amount, according to Consumer Reports, despite advertising they don’t have any interest or fees. Not only would your credit score be impacted by this late payment, but a significant increase from this penalty on a big-budget item can negatively impact your budget. To ensure that you are not affected by these hidden late fees, read the fine print before signing up to use an app for your next purchase. 

Impulse Purchasing Risks & Regulatory Oversight 

Time Magazine suggests only using buy now, pay later services for essential items, such as a mattress or laptop. If a consumer shops online frequently or tends to make impulse purchases, it is advisable to stay away from these apps or use them very sparingly.  Before you select the BNPL option, calculate you can afford the payments for the cost of the entire item. It is recommended using these apps responsibly and only for one purchase at a time. 

The Consumer Federation of America reported in October 2023 the misunderstandings and regulatory gaps in these services, finding that those with lower incomes tend to report using these services to make a purchase fit into their budget, a lack of general understanding about them, and lack of governmental regulation. 


When encountering a buy now, pay later app or services, consider your options, and do your research. It is advised to read the disclosure for any hidden fine print to see late fee information and all that you are agreeing to before using them. For individuals who may not be able to qualify for a credit card, BNPL apps are a helpful option for those large and necessary purchases. Likewise, for unforeseen financial emergencies – an appliance that just broke or a shattered phone screen – this can ease the financial stress. 

As with any new financial service, analyze your personal situation. Decide if you can afford the item you are buying in the long run. If you tend to not pay off your credit cards at the end of the month or know that you don’t budget well, BNPL might not be for you. 

Want more financial advice or increase your money management skills? Make sure to check out our MoveUp Financial Wellness Program, so you can gain the skills you need to help reach your financial goals, save more, budget, and feel confident managing your money. Take digital modules, learn tips on how to manage your small business, or your own finances, and learn what works best for you. Financial management is not a one size fits all – every person and every family is different. We want to help you live your best life and give you the confidence you need to make smart financial decisions, so you can just be yourself! 
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