← Back to all guides

Buy now, pay later: what to check first

4 min read

What these instalment plans are, where they can catch people out, and a short checklist before you click.

"Buy now, pay later" (often shortened to BNPL) or "Pay in 4" options appear in shops and online checkouts. They can be handy, but they are still loans. This guide is based on tips from the New York City Department of Consumer and Worker Protection, a US local government agency.

What it is

The agency describes these as short-term loans that let you pay for something in small instalments. You avoid fees or interest if you pay in full and on time. The agency also warns that it can be easy to spend more than you intend.

A checklist before you agree

1. Think about the item and the loan. The agency says to ask whether a loan is the best way to buy the item, and notes it may be best to wait until you can save enough to pay the full price.

2. Read the fine print. Payment periods, fees and interest rates vary a lot. Some plans claim to be free of fees and interest but charge more for late or missed payments. Different companies usually have different schedules.

3. Check the return policy. Make sure you understand how refunds, returns and exchanges work with the specific plan. The agency says consumers have reported difficulty returning items bought this way.

4. Budget before you buy. Your income over the loan period should cover the payments plus essentials like housing, food and transport. The agency adds that if your income varies from week to week, it may be better to save the amount for the item at full price.

5. Know how it may affect your credit record. The agency says these companies do not report payments to the major credit bureaus consistently. Late payments often lower a credit score, while on-time payments may not improve it. Credit reporting differs by country, so check how it works where you live.

6. Limit how many plans you have. Several plans at once can be hard to manage, because they can have very different payment dates and terms. The agency suggests avoiding many at the same time, and, if you do have more than one, using the same company to line up dates, and turning on text or email reminders.

7. Check autopay. Many plans default to automatic payments. If your bank account allows overdrafts, automatic payments may not suit you. The agency says that in the US you have a legal right to stop them. Rules elsewhere can differ.

An example

These are made-up amounts. A coat costs 120 and is offered as four payments of 30. If you already have two other plans taking 40 and 25 from your account around the same time, your payments that week are 95 instead of 30. Writing every due date into your budget calendar helps to see this before it happens.

What about the EU?

Your Europe, the EU's official consumer guide, describes rights for consumer credit, such as a standard information form, a single APR figure, and 14 calendar days to withdraw. Its page covers loans from 200 to 75,000 euro and does not mention buy now, pay later plans. We therefore cannot say which of those rights apply to a given plan. Read the terms for each plan, and check the rules in your own country.

Our suggestions

These are our ideas, not from the sources:

• Put each instalment in your budget as a bill before you agree.
• Keep a list of every plan you have, with dates and amounts.
• If a purchase does not feel comfortable, you can wait. A sinking fund lets you save toward it instead.

If you need help

The NYC agency offers free financial counselling to people in New York City. Elsewhere, look for a free, independent money advice service in your own country.