If you’ve shopped online anytime in the last few years, there’s a good chance you’ve come across a buy now, pay later (BNPL) option at checkout. Companies like PayPal, Klarna, Affirm, and Afterpay offer short-term financing that allows consumers to make purchases and pay for them at a later date, typically without interest. Also called “point of sale installment loans,” these loans are paid in equal installments weekly, biweekly or monthly. But are they too good to be true?

We’re breaking down the pros and cons of buy now, pay later services below. 

The pros of buy now, pay later

  • Convenience and ease
    • By far the biggest selling point of BNPL is how convenient and easy to use the service has become—it’s everywhere! And it’s often easier to get approved compared to a traditional credit card or line of credit.
  • No fees (if you pay on time)
    • Most BNPL plans are offered interest-free, which is another perk of using this service over say, a personal loan that will charge interest over the term of the loan. 
  • Soft credit checks 
    • These companies often only require a “soft credit check” for approval, which doesn’t affect your credit score. If they conduct a hard pull of your credit, this can temporarily impact your score.

The cons of buy now, pay later

  • Can lead to overspending
    • Not having to pay for your entire purchase up front sounds great, but it can lead to overspending and tempt you to make impulse purchases, which might put you into debt down the road. 
  • Late fees & penalties
    • While you may be making interest-free payments with BNPL, if you miss a payment you’ll likely be hit with late fees and penalties. You may also have to pay interest after missing a payment.
  • Negative impact on your credit score
    • Missing a payment with BNPL can also hurt your credit score. While your on-time payments don’t get reported, any missed payments or defaults will be reported to the major credit bureaus.
  • Difficult to return items or get refunds
    • Once you make a purchase using a BNPL service, you’ll have to go through them and the retailer if there’s an issue with your purchase. There’s also a risk that payments continue even if you’ve made a return, so you need to keep a close eye on your bank account.

The bottom line

BNPL is a great option if the purchase already fits your budget and you want to spread payments out over a few weeks or months. If you’re confident you can keep up with payments, give it a shot.