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| Company | Number of Installments | Interest Rate | Amount Due at Purchase | Late Fees | Popular Brands |
|---|---|---|---|---|---|
| Affirm Best Overall | Varies | 0% to 36% | Varies | None | Walmart.com, Peloton, Expedia, Pottery Barn |
| Sezzle Best for Flexible Payment Plans | 4 | 0% | 25% | Up to $15 | Ulta, GameStop, Altitude Sports, Public Rec |
| Afterpay Best for Students | 4 | 0% | 25% | 25% for orders less than $40, up to 25% or $68 max for orders $40+ | Old Navy, Bed Bath & Beyond, Forever 21, adidas |
| Splitit Best for No Credit Check | 3 to 24 | 0% | Varies | None | Echelon Fitness, GlassesUSA, REST |
| Perpay Best for Bad Credit | Varies | 0% | Varies | None | Samsung, Apple, Beats, Nintendo, Michael Kors |
| PayPal Pay in 4 Best for Small Purchases | 4 | 0% | 25% | None | Fossil, Bed Bath & Beyond, Lands’ End, ALDO |
| Klarna Best for Large Purchases | Varies, up to 24 months | 0% to 33.99% | Varies | Are charged | Sephora, Bed Bath & Beyond, Nike, Tommy Hilfiger |
What Is Buy Now, Pay Later?
Buy now, pay later refers to the apps and services often available at online checkout that allow you to buy something and pay for it in installments instead of at full price right away. It’s kind of like a short-term loan that you pay back over the course of a few months (sometimes longer). These installment loans typically come with little or no fees or interest rates, which makes them appealing. However, there may be some risks to consider before opting for this payment plan at checkout.
Example of a Buy Now, Pay Later Purchase
If you’re wondering how a buy now, pay later app works, here’s an example. Let’s say you want to buy a new couch for your living room. The couch costs $1,000. You’re purchasing it online and when you get to the checkout screen, you have a few options for payment. You can pay with a credit or debit card, or you can select from a buy now, pay later service that the furniture store works with.
You select the buy now, pay later service and decide to pay for the couch in four equal installments over the course of four months. This breaks the payment down into $250 per month. You agree to the terms and fill in your personal information so the service can bill you each month for the couch. You pay the first $250 payment now.
Four weeks later, you get your couch shipped and delivered to your home. You also have payment number two to make to the buy now, pay later service. It comes out of your checking account directly. You now get to enjoy your couch while making the last two payments over the next two months.
Two months later, you make your final payment of $250. You are officially done paying for the couch with the buy now, pay later service.
Pros and Cons of Buy Now, Pay Later Apps
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Pay over time with little or no interest or fees
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Often comes with easy approval
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Sometimes based on a soft credit check that won’t impact your score
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Adds to your personal debt
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Could impact your credit score if you fail to pay
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Won’t help you build your credit
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Returns could be complicated
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No rewards earned on purchases
How to Choose the Best Buy Now, Pay Later App
There are many buy now, pay later apps to choose from when buying goods and services. However, most retailers partner with just one BNPL app, so their partner may be the easiest service to work with to complete your purchase.
Assuming you have a choice of which service to use, here’s how to choose the best buy now, pay later app for your purchase.
- Consider your credit score: If you have bad credit or a thin credit history, it may make sense to select a BNPL app that does not check your credit score.
- Pick a BNPL app that reports to the credit bureaus: If you’re working on building your credit, you’ll benefit from making on-time payments if the BNPL app reports your activity to the major credit bureaus.
- Choose a BNPL that is accepted at the retailer: When you apply for a BNPL account, choose one that is accepted at many of the stores you shop so you don’t need to open multiple accounts.
- Check the credit limit: The credit limits of BNPL apps vary from company to company. Depending on the size of your purchase, having a larger credit limit may make the difference between being able to complete your transaction or not.
- Check the fees and interest rates: Review the account details to determine if there are any fees for using the service, making a payment, or other activities. Also, will you be charged interest if you make your payments on time? If so, what are the rates?
When to Use a Buy Now, Pay Later App vs. a Credit Card
While buy now, pay later apps are similar to credit cards, they each have a role to play for today’s consumers. During checkout, you’ll have to decide which method you want to use to complete your transaction. Here are a few situations where you’d want to use one form of payment over the other.
When to Use a BNPL App
Choose a buy now, pay later app when you want to:
- Make purchases without a credit inquiry
- Get an instant decision for new credit
- Pay over time without being charged interest
- Pay off purchases with minimum payments
- Build credit without getting a secured credit card
When to Use a Credit Card
Use a credit card instead of a BNPL app when you want to:
- Get special discounts for using a store-branded retail card
- Earn cash back, miles, or points on your purchase
- Meet a minimum spend requirement to earn a welcome bonus
- Earn benefits based on your annual spending totals
- Get price, return, and purchase protection benefits
- Receive a complimentary extended warranty
- Have flexibility of lower minimum payments
Not all credit cards provide these benefits, so review your credit card’s benefits guide or call customer service to verify if your card does. Otherwise, it might be time to replace your credit card with one that offers better benefits.
Alternatives to Buy Now, Pay Later Apps
Buy now, pay later apps are short installment loans. If you don’t want to use one for a purchase, there are other options.
Layaway
Layaway is less popular now than before technology made paying for items easier. With layaway, you make a down payment on an item. The store holds it until you finish making installment payments. Only then do you get to take the item home with you. Compare layaway and buy now, pay later apps before deciding which is right for you—the latter allows you to take the item home with you immediately.
Rent-to-Own
You may have heard of Rent-a-Center stores or other retailers offering rent-to-own payment plans. These allow you to pay for an item over time while using it at home until it is paid in full. Only then do you own it. If you don’t make the payments, the store or retailer can take the item back. There’s often no credit check with rent-to-own plans.
Debit Card
A debit card allows you to pay for items with money that is directly in your checking account. As long as you have money in the account to cover the cost of the item, swiping your debit card or typing in your card info online is an easy way to pay for something upfront and interest-free. Just be mindful of overdraft fees if you accidentally overdraw your account.
Credit Card
A credit card can be used to pay for items in person or online. After swiping your card or typing in your card info, the charge will appear on your credit card statement. You’ll be required to pay it back with money from your checking or savings by the due date, or you’ll risk paying a high credit card interest rate. Paying the interest rate will make the original purchase more expensive.
If you use credit cards the right way, they can help you build your credit history and increase your credit score. But be careful, too—you don’t want to go into credit card debt if you can help it. If it’s the only way you can pay for something, then it is an alternative option to a BNPL app—though the app could help you save money in the long run if you pay no interest.
Cash
Cash is a good way to pay for purchases in person without risking additional fees or interest charges. Some retailers charge less for items when they’re paid for in cash. For example, some stores and brands will charge an additional credit card fee if that’s how you choose to pay. Using cash can help you save money. However, if it’s between cash and a BNPL app, consider whether you need the additional time to pay back the purchase and if you’ll have the money to do so in the coming weeks.
Personal Loan
A personal loan is typically used for larger purchases or projects, such as a home renovation or a wedding. However, if you really need money to pay for a purchase, you could take out a personal loan and then use the money to pay for the item instead of a buy now, pay later app. Personal loans come with interest, and you’ll be required to pay back the loan in full by the end of the term (anywhere from a few months to several years). Taking out a personal loan usually requires a credit check.
Venmo or PayPal
Venmo and PayPal are two ways to pay for items via electronic transfer of funds. Not all retailers accept Venmo or PayPal—or other apps like them. If the retailer does, you’ll need to make sure your PayPal or Venmo are connected to your bank account so that the money can transfer through the app to the retailer. Venmo and PayPal don’t typically come with interest or fees, but read the fine print before choosing one of these payment methods.
Why You Should Trust Our Picks for Buy Now, Pay Later Apps
Investopedia identified the most important factors when it comes to picking a buy now, pay later app. We then collected hundreds of data points from over 20 companies so that we could compare them and determine which one is the best for you. We considered factors like terms, credit checks, loan terms, fees, interest rates, and more. Investopedia launched in 1999, and has been helping readers find the best BNPL apps since 2021.
Frequently Asked Questions
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BNPL apps work in coordination with the merchant that you are purchasing from. Most do not charge interest as long as you make the scheduled payments on time. If you miss a payment, you may be charged interest and a late fee. The BNPL app earns a fee from the merchant for processing the transaction, similar to how a credit card transaction works. It’s a win-win situation because the customer receives their product today, the merchant makes a sale that might not otherwise have happened, and the BNPL app earns a fee for handling the financing.
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If your BNPL app reports to credit bureaus, then your positive payment history will help build your credit score. For example, Perpay customers increase their credit score by an average of 36 points. However, many of these BNPL loans are short-term in nature and, therefore, don’t create a payment history that is long enough to report to the credit bureaus.
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No set credit score is required to use a BNPL app. There are many BNPL apps to choose from. While some perform a soft inquiry to check your credit, many others do not require a credit check at all. Even if you have bad credit, services that do not require a credit check enable you to shop today and pay over time by using alternative methods to determine your credit limit.
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Buy now, pay later apps do not often report your payment activity to the credit bureaus. This means your activity does not help or directly hinder your credit score. However, your choice to use a BNPL app will show up on your credit history because you’re taking out a loan and a soft credit check is often required for approval. Additionally, if you miss payments or make no payments, your profile could be sent to collections and a debt collector could then report your activity to the credit bureaus.
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In order to use a buy now, pay later app, you typically need to be at least 18 years of age, have a mobile phone number, and a bank account or credit card so that you can make your payments.
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There are several buy now, pay later apps and programs on the market to choose from. Besides the top apps you see in this article above, including Affirm, Sezzle, Afterpay, Klarna, Splitit, Perpay, and Paypal Pay in 4, there are also Zip, Uplift, Zebit, Humm, Clearpay, Subnbit, Deferit, Paidy, Laybuy, Four, and Zilch.
How We Determined the Best Buy Now, Pay Later Apps
To find the best buy now, pay later apps, we researched over 20 BNPL services to find those that work best for a variety of shopping goals. For our analysis, we compared ease of purchasing, interest rates, fees, credit checks, how payments are handled, and other relevant features. These data points were assigned a score and weighted based on their importance to each type of consumer. We continuously monitor data from BNPL services to update our rankings to provide our readers accurate recommendations.
Your Guide to Buy Now, Pay Later Apps