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Consumer Protection, Financial Literacy

Should I Use a Buy Now Pay Later Service?

By Sarah Brady | Monday June 20th, 2022

buy now pay later BNPL

If you shop online, you’ve probably seen a buy now pay later (BNPL) service —like Affirm, Afterpay, Klarna or Paypal— during the checkout process.

In recent years, these services have become incredibly popular. In fact, more than 45% of U.S. adults have signed up for at least one BNPL plan, and they’ve spent more than $20 billion using BNPL. But there’s a lot of risk involved with using these services. Here’s what you need to know.

How Do Buy Now Pay Later Services Work?

Each BNPL company offers something a little different, but they allow you to make a purchase now, and pay most of the bill later. Most users don’t realize this means taking out a loan.

In most cases you’ll pay back the BNPL loan over a set number of installments — usually four payments, with a 25% down payment due at checkout. You may also be charged interest and fees.

To set up the transaction, you may be rerouted to the BNPL’s website or app, and you can provide your debit card, credit card or checking account to set up payments. Then the BNPL withdraws the loan payments and fees at the set intervals.

Is it Safe to Use Buy Now Pay Later Services?

If you need help covering necessities like a medical bill, BNPL may seem like a solution. But there’s overwhelming evidence that BNPL services create more problems than they solve.

Forty-five percent of BNPL users say they use the services to make purchases that don’t fit in their budgets, and one survey from Debt Hammer found that 30% of BNPL users have struggled to make their payments.

A January 2022 survey from Morning Consult found similar results: 20% of BNPL borrowers had missed a loan payment that month, and BNPL users were more than twice as likely as other adults to have an overdraft.

10 Reasons to Avoid Buy Now Pay Later Services. 

Before using a buy now pay later service, consider the long list of drawbacks:

  • The temptation to overspend. Retailers offer BNPL because it causes consumers to buy more, and 55% of shoppers say they spend more when using BNPL.
  • No affordability screening. Unlike other lenders, BNPL companies collect relatively little financial information before approving a transaction, which is why so many users can’t afford their payments.
  • Poor regulation. BNPL companies are essentially lenders, but some have been fined for operating without lending licenses.
  • High risk of missing payments. An Ascent survey found that 31% of BNPL users had made a late payment or incurred a late fee.
  • Twice the fees. Missing a payment could mean double charges — a fee from the BNPL service and an overdraft fee from the bank.
  • Complications with returns. Even if you return your purchase, you may still have to continue paying your BNPL loan until the retailer processes the return.
  • Risk of Fraud. One in seven BNPL users report having experienced fraud.

How Can Consumers Protect Themselves?

Before agreeing to any loan, whether BNPL or not, always consider the risk. There’s a reason so many consumers miss their BNPL payments. Avoid the trap they’ve fallen into by making sure you only purchase items you know you can 100% afford.

If you’re already struggling with BNPL payments, professional support is available. An NFCC Certified Financial Counselor can help you adjust your budget and review debt management options. It may be hard to see your way out, but a counselor can help you create a roadmap to becoming debt free.


About the Author: Sarah Brady is a Personal Finance Writer and educator who’s been helping people improve their financial wellness since 2013.

Sarah writes for other publications, including Experian and Investopedia, and she’s been syndicated by Yahoo! News and MSN. She is also a workshop facilitator, a former consultant for the City of San Francisco’s Affordable Home Buyer Programs, and she’s proud to be a former NFCC-Certified Credit Counselor and HUD-Certified Housing Counselor. Sarah can be contacted via