Buy Now Pay Later (BNPL): The Definitive Guide (2022)

Buy Now Pay Later (BNPL): The Definitive Guide (2022)

By Brooke Vaughan

This is a complete guide to Buy Now Pay Later in 2022. In this guide, you’ll learn:

  • What Buy Now Pay Later is and how it works
  • Pros and cons of BNPL
  • How BNPL differs from a credit card
  • How BNPL affects your credit score
  • Popular BNPL services and where you can use them

Table of Contents

What Is Buy Now Pay Later?

In this section, you’ll learn the basics of Buy Now Pay Later, as well as when and where to use it.

Buy Now Pay Later, often shortened to BNPL, is an alternative payment option that allows you to split up a purchase into several equal payments, or installments, with the first installment due at checkout. BNPL is most commonly used for online purchases but can also be used when shopping in-store.

Some call it short-term financing. Others call it a point-of-sale installment loan or short-term unsecured loan. Whatever you choose to call it, Buy Now Pay Later is a form of debt.

How Does Buy Now Pay Later Work?

In this section, you’ll learn step-by-step how Buy Now Pay Later works, how to pay your installments, and when to submit your payments.

There are tons of different BNPL services, each with its own terms and conditions. However, the general idea is the same:

  • When you’re ready to make a purchase, select the Buy Now Pay Later option at checkout (this may be through a company such as Affirm, Afterpay, Klarna, or Sezzle).
  • Within minutes, the system will either approve or deny you the financing.
  • If approved, you will pay the first installment at the point of sale.
  • The remainder of your balance will be divided into equal installments due on predetermined dates.


For example, some BNPL services divide your purchase into four equal installments due biweekly over the course of one month. Others may spread your installments over a much longer time frame (sometimes even a year for larger purchases).

Your first installment secures your purchase, enabling you to take it home with you from the store or giving the merchant the green light to go ahead and ship it to you. Then, it is your responsibility to pay off your installments on time and in full.

Often, you can set up automatic payments so you can “set and forget” them, so to speak. If you’re not comfortable with autopay, you can also pay your installments manually.

After you’ve completed your purchase, some BNPL services will send you a confirmation email containing the cost of your future installments and their corresponding due dates.

Pros and Cons of BNPL

Like with any form of credit, BNPL comes with some serious advantages and disadvantages. In this section, you’ll learn what to keep in mind before making the purchase with BNPL.

Pros of BNPL

Before the pandemic, the world was already becoming increasingly digital (like how you’ve thought of a shirt and the same one pops up on your Instagram timeline the next day — we’ve all been there). But with consumers largely stuck at home over the past few years, they’ve had ample opportunity to pile things into their virtual shopping cart and click Purchase.

BNPL enables you to make purchases even if the money is not currently in your account. For expensive items like electronics and furniture, spacing out your payments into four equal installments over time can give you the breathing room that you need.

Also, BNPL services typically do not require a hard credit inquiry (only a soft one). This makes them more accessible than other forms of credit.

On top of that, BNPL services boast enticing offers like interest-free and fee-free payment plans, unlike many credit cards and other lines of credit.

Cons of BNPL

Don’t be fooled. BNPL can have some serious downsides.

While many BNPL services do not come with interest or fees, they can still penalize you for missed or late payments. BNPL services may report these payments to one or more of the major credit bureaus (Equifax, Experian, and TransUnion), which can damage your credit score. This will not only hurt your chances of using the BNPL service in the future, but it can also hurt your chances of getting access to credit, period — be it a credit card, personal loan, mortgage, or another line of credit.

Some BNPL users call these services “addicting” because you have virtual access to just about any product or service out there. However, because the money only comes out of your bank account little by little, the financial consequences are not immediately apparent. In other words, it can be easy to rack up a mountain of BNPL debt if you don’t manage your spending.

Returns can also be difficult. When you return something purchased with a debit or credit card, the refund is processed directly through the merchant.

However, when you make a purchase with Buy Now Pay Later, the BNPL service acts as a middleman. You can return the item to the merchant, but until the BNPL service receives proof of the return, you will need to continue paying your installments to avoid a late or missed payment.

When all is said and done, BNPL can be a good financial tool if you are aware of the service’s terms and conditions and you make your payments on time and in full. But if you use BNPL irresponsibly, you can find yourself in a world of financial trouble.

How Is BNPL Different from a Credit Card?

Buy Now Pay Later is a form of credit, but it is different from a credit card. In this section, you’ll learn how they are different and when you might want to use one over the other. 

Both Buy Now Pay Later and credit cards are a tool to help you purchase something even if you do not have enough money in your account at that exact moment.

If you buy something with BNPL, you will pay the first installment (usually ¼ of your purchase) at checkout. The remaining balance will be divided into equal installments to be paid on a regular basis. They also usually will not accrue interest if you make on-time payments. Once you’ve paid off the purchase, your account will close until you make another purchase through the BNPL provider.

When you purchase something with a credit card, the entire balance will be added to your credit card bill. You are only required to make the minimum payment at the end of each statement period. Whatever balance you do not pay off will accrue interest at a rate set by your financial institution (unless you have a credit card with 0% APR).

Whether you use BNPL or a credit card is dependent on your financial situation, goals, and what you have access to. Since BNPL does not typically require a credit check, people with little or lower credit history may have an easier time securing BNPL financing.

If you’re just looking to get assistance with a one-off payment, BNPL may be the way to go. On the other hand, if you are looking for longer term access to credit, you might want to opt for a credit card.

Additionally, credit cards often come with benefits such as cash back, travel rewards, and points, which can be redeemed for various perks. Buy Now Pay Later services don’t tend to come with these bonuses.

Does BNPL Affect Your Credit Score?

In this section, you’ll learn if and when using Buy Now Pay Later will affect your credit score, as well as how you can avoid negative impact. 

Most BNPL services (though not all) will only conduct a soft credit check when you sign up for the service. This means that the company will look into your credit history, but the search will not cause your credit score to drop.

If a company does do a hard inquiry into your credit history, that will cause your score to drop several points; however, it should rebound within a relatively short period of time.

When you use BNPL responsibly and make on-time repayments, it won’t affect your credit score. However, if you make a late payment or miss it entirely, some BNPL services will report your delinquency to one or more of the credit bureaus, which will harm your credit score.

Not only will this hurt your chances of being able to secure BNPL financing in the future, it can also hurt your chances of getting access to other lines of credit.

Popular BNPL Services

In this section, you’ll learn about the top Buy Now Pay Later services that may pop up during your next checkout experience. 

There are more than 100 Buy Now Pay Later companies, and new ones are added to the listed every day. But if you’re shopping at a mainstream store, chances are that you’ll run into one of these names.

  • Klarna
  • Afterpay
  • Affirm
  • Sezzle
  • PayPal

What Can You Buy with BNPL?

In this section, you’ll learn about different products, services, and companies that allow shoppers to make purchases with Buy Now Pay Later, whether in-store or online. 

The idea is that BNPL makes it easier and more convenient to buy just about anything. Therefore, there is virtually no limit to the types of consumer products that you can buy with BNPL.

The key is to not overextend yourself. It can be easy to drop a pretty penny on products when the full balance is not immediately coming out of your bank account. When you use BNPL, a good rule of thumb is to only purchase products that you can reasonably pay back in the amount of time laid out by your contract.

Some products and services that you can buy with BNPL include:

  • Clothing and shoes
  • Skincare and beauty products
  • Electronics
  • Furniture
  • Appliances
  • Flights
  • Hotel stays
  • Physical and e-gift cards
  • Tires


Notable companies that offer Buy Now Pay Later as a payment option include:

  • Apple
  • Amazon
  • Walmart
  • Best Buy
  • Ticketmaster


Even if a store does not partner with a BNPL service and offer it at checkout, you can use BNPL through a virtual card, mobile app, or browser extension.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $13 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $13 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

Track and pay all of your Buy Now Pay Later installments in one place. Join the waitlist for a new Cushion offering coming soon!

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In addition to finding bank fees, Cushion now:
  • 📊 Finds & organizes your bills
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