Is Buy Now, Pay Later Too Good to be True?

Buy now pay later

Have you heard about Buy Now, Pay Later (BNPL)? It is an installment loan that chops up your larger purchase into smaller payments. Your first payment is due right away, and the remaining payments are automatically set up until the balance is paid in full.

You might have already seen it and not realized what it was. There you are, browsing online with a bunch of items in the shopping cart, or staring longingly at the large purchase you’ve wanted for a long time, or possibly finding the vacation that will whisk one’s worries away in a week. Then, a magical offer appears: “Pay a smaller amount now, in easy installments!” You say to yourself, “I’ll make it work!” and you buy now. We have all been there — in fact, 50% of us have used BNPL before — and one out of every three people use it once a month or more.

Sounds too good to be true, right? Well, depending on your situation, this option might end up costing you in the long run.

For example: Your total purchase is $200. With Buy Now, Pay Later, you pay $50 right away, then three more payments of $50 every month at 0% with an $8 late charge. That might not seem like a big deal, but if you pay late going forward, paying $24 in fees is like paying 50% APR!

While BNPL feels like a safer option than traditional loans or credit cards, it is not risk-free. Let’s take a look at the pros and cons:


  • If you pay on time, you might not pay any interest or fees.
  • It is convenient and available from most major online retailers.
  • You receive instant approval with no minimum credit score required.


  • Some plans might charge interest or fees up front.
  • Payment plans vary. You might pay every two weeks or monthly.
  • If you pay late or can’t pay off the balance under the original plan, you will be charged late fees or high interest.
  • There is less consumer protection for payment disputes than if you purchased the item with a credit card.
  • Your data might be collected and sold.
  • Some plans report to the credit bureaus, affecting your debt-to-income ratio when qualifying for an auto or home loan.
  • BNPL encourages impulse spending, and you could quickly accumulate more than one payment plan at a time.

The last item under the Cons list bears repeating: Buy Now, Pay Later was created specifically to get you to spend more in a short period of time. In an Ascent survey, 45% of people use Buy Now, Pay Later to purchase items that do not fit in their budget. Unfortunately, with the cost of living increasing, people are turning to BNPL to buy necessities like groceries. This can turn into a cycle of debt and juggling payments to make ends meet. If money is tight, consider looking at ways to reduce expenses. Our blogs have suggestions on reducing your expenses generally and on cutting your grocery bills specifically. You can also reach out to local community resources (for instance in Minnesota, Fare For All — The Food Group (

If you are able, put a pause on buying now, and instead set that monthly payment aside in a savings account. That will help you determine if the payment is affordable or not and give you a cooling off period to see if you still want to make that purchase. You might end up with a new catchphrase instead: Save now, buy later!

LSS Financial Counseling can work with you on other strategies to set aside money into savings, create workable budgets, and manage and eliminate debt.  Call 888.577.2227 to set up a free confidential appointment, or get your support online.

Kim Miller


Author Kim Miller is a Certified Financial Counselor with LSS Financial Counseling