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What is buy now, pay later?

minute read

    “Buy Now, Pay Later" (BNPL) refers to a payment option that allows the full payment of a purchase to be split into scheduled payments. Many companies offer BNPL purchases or purchases that include the BNPL option. Although they work in a similar way, there are a couple types of BNPL that we'll review.

    In this article, here's what we'll explain:

    How does BNPL work?

    Advantages and disadvantages of BNPL.

    What are the types of BNPL?

    Why do people use BNPL?

    An example of BNPL.

    How does BNPL work?

    The most common place you'll encounter a BNPL option is during checkout for an online purchase. At that time, you may be able to choose from several payment methods, such as a credit card, debit card or PayPal. BNPL providers may appear among the payment options. The application process may vary but can be fast and require little information from you.

    Purchases between $50 and $1,000 tend to be eligible for BNPL, but that will vary by company. A typical payment schedule requires 25% of the purchase during checkout, then has installments with specific due dates and frequencies. In addition, while many BNPL options do not charge interest on their payment plans, there may be fees.

    In some cases, you may be able to change the payment method you use to pay for each other installment of the BNPL plan.

    We've been talking about one of the main types of BNPL. There is another type of BNPL featured by some credit cards on the market today, and we'll cover that next.

    What are the types of BNPL?

    The concept of BNPL is nothing farfetched: Buy something today in agreement that you will pay for the entire cost over time. However, there's been a surge in companies providing BNPL in the last several years. You may have seen some when shopping online, and your credit card might offer a BNPL feature.

    You're likely to find two main types of BNPL on the market:

    • A traditional BNPL product provides a payment option that splits a purchase into multiple payments, with or without interest, at the time of payment.
    • A BNPL feature allows you to split a transaction of a certain amount into monthly payments after the purchase has been completed.

    My Chase Plan® is a BNPL feature offered with certain Chase credit cards. With an eligible Chase credit card and My Chase Plan, you can break up card purchases of $100 or more into equal monthly payments. My Chase Plan is available on many Chase credit cards, including:

    • Chase Freedom®
    • Chase Freedom Unlimited®
    • Chase Freedom Flex℠
    • Chase Freedom® Student
    • Chase Sapphire®
    • Chase Sapphire Preferred®
    • Chase Sapphire Reserve®
    • Chase Slate®
    • Chase Slate Edge℠
    • Many Chase hotel cards and airline cards

    My Chase Plan durations range from 3 to 18 months. The ranges available are based on the purchase amount, your creditworthiness and your account history. From the available offers, you'll select how many billing periods it will take to pay the My Chase Plan balance in full by making regular payments each monthly billing period.

    Another example of BNPL

    A traditional BNPL product is usually offered when you check out through an online storefront. You'd follow the prompts, fill in any required fields and, when you have to select a payment option, a BNPL button or link would appear. From there, the final steps tend to be straightforward. You can review your options, read the terms and conditions, enter any other required information, then follow the final prompts to complete enrollment and your purchase.

    Advantages of BNPL

    BNPL products can be easy to use. When that ease of use is paired with other distinguishing features, such as a tendency to not charge interest, BNPL can be appealing.

    Most BNPL plans are easy to access

    When shopping online or from your smartphone, your access to a BNPL plan may be simpler than ever. At checkout, this is where a BNPL company could appear in a short list of the merchant's payment options. Once you choose a plan, the information you enter and prompts you follow to complete enrollment are usually brief.

    Credit cards with BNPL features like My Chase Plan can also be easy to use but won't appear at the time you make a purchase. You can start a plan from an eligible purchase in your credit card activity, or through the My Chase Plan dashboard on You can also use the dashboard to check the status of your plans.

    BNPL plans do not usually charge interest

    The amount of interest you could pay with a BNPL plan can be very enticing when compared with the interest loans and credit cards charge. Usually to avoid interest charges on a credit card, for example, specific terms will have to apply.

    Fees may be low compared to traditional credit options

    Traditional credit options like credit cards may have annual fees. Those can be higher than the fees that BNPL products charge over the course of a payment plan. Other fees common to credit cards are charged for foreign transactions.

    Disadvantages of BNPL

    There are some aspects of BNPL you may find counteract its typical ease of use and potential low interest or fees.

    Consumer protections

    BNPL loans have somewhat different consumer protections than credit cards do. Typically, the terms of BNPL products do not provide protections that are common in other consumer credit products. In some cases, for instance, a BNPL company might require you to use an automatic payment program.

    Credit cards, on the other hand, generally give you a choice of paying your minimum amount due or another payment amount. You can typically make your BNLP payments any time ahead of the due date, too.


    A BNPL company usually refunds any payments you’ve made on a purchase after you return it. After the return, other scheduled payments should also be canceled. However, you may be held responsible by the BNPL company for the total cost of a purchase, even after you've completed a return. That's why it's important to read the BNPL and merchant's terms and conditions carefully.

    Debt accumulation

    In short, when you choose BNPL to pay for a transaction, you are borrowing money, which is how debt accumulates. Of course, the final cost of a BNPL loan is usually the original purchase amount unless there are additional fees or interest. Yet, although the loan may not appear on your credit report, BNPL is like other forms of credit: The amount owed is debt.

    Late fees

    While most BNPL products don't charge interest, late fees for missed payments are common. In this way, BNPL companies operate like other lenders, and different fees and policies apply to specific payment plans.

    Why do people use buy now, pay later?

    BNPL may have risen in popularity mostly because it is an alternative form of credit for purchases at major and small retailers. People may be inclined to use a BNPL product because they are wary of traditional credit products because of the potential interest they charge.

    Sometimes, just because BNPL products offer an option to defer a portion of a big purchase, customers may be more likely to choose the BNPL option. For these buyers, the purchase could seem massively discounted—the cost “right now" instantly seems much lower. However, BNPL is a form of credit, and therefore a form of debt that comes with terms and conditions for repayment.

    In conclusion

    As a form of credit that may not always charge interest or fees, traditional BNPL products have advantages and disadvantages. The same is true for a BNPL feature available through a credit card, which is available after a purchase is already made. People tend to use both types of BNPL products for different reasons, but a big one seems to be how easy they are to use. You'll have to decide what's best for your purchase and finances when faced with the many BNPL plans available today.

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