Key Takeaways 

  • Buy Now Pay Later (BNPL) is a short-term loan that is typically repaid in four equal payments, usually over a six-week period. 
  • BNPL plans charge no interest or fees – IF you make all payments in full and on time. 
  • BNPL can be easy and convenient, but consumers need to evaluate whether it’s worthwhile to take out a loan to pay for something over just six weeks.  

One in five Americans plan to use a Buy Now Pay Later (BNPL) loan to purchase holiday gifts, according to a study by Adobe. Those loans are expected to account for $17 billion in online spending – up 17% from last year. 

If you’re one of those consumers considering a BNPL plan this holiday season, make sure you understand the ins and outs before you jump on the bandwagon.  

How it works 

BNPL is an installment loan, which is a type of loan you repay over time with a set number of scheduled payments. With BNPL plans, payments of equal amounts are typically due weekly, every two weeks or monthly. Retailers (online and in-store) offer BNPL to customers as an alternative to making up-front payments in full. There are several different platforms retailers can use to offer BNPL plans. 


  • Convenient way to pay for some purchases. If you’re unable to purchase a needed item in full immediately, BNPL options allow you to split that cost into smaller payments over time. 
  • Short-term. Unlike a credit card, on which you could make minimum payments for a very long time, BNPL loans are short-term. Usually, there are four required payments. When those are made, the loan is done. You don’t end up paying far more than the purchase price of an item, as you would if you made minimum payments on a credit card purchase. 
  • No interest, no fees…IF you make all payments in full and on time. 
  • Possibility of automatic payment. Many BNPL lenders allow automatic payments by keeping a credit or debit card number on file. (On the downside, this could lead to overdraft issues.) 
  • Fast approval. You set up an account during checkout, or through an app, with approval taking minutes or seconds. 


  • It’s a loan. With most BNPL plans, the first of four required first is usually due at checkout, while the remaining three will be due at specified intervals. Every two weeks is common, but it could be weekly or monthly, depending on the plan. These payments will be billed to a credit or debit card (or a bank account) you provide. That means you’re signing up for a loan in order to pay for something over a six-week period. 
  • Complications to your financial life. One of the biggest challenges of BNPL plans is paying on the due date. It sounds simple, but the reality is that it’s one more payment to manage, along with rent or mortgage, utilities and any other debt payments. Making sure to pay on the typical every-two-weeks schedule can become challenging for even an organized person. 
  • Interest that can mount up quickly. If you make all payments in full and on time, most plans do not charge interest. However, if you’re late on any payment, you will pay interest – with rates that are sometimes even higher than credit card interest rates. Even if you’re late by a day, some plans will charge interest for the entire duration of the repayment period. Plus, some plans charge late fees. 
  • Refund (ineligibility). Some items purchased with a BNPL plan are not eligible for returns or refunds. Read the agreement carefully to know what the terms are for the retailer you’re working with and product you’re buying. 
  • No guarantee that payments will be reported to credit reporting agencies. Some BNPL providers provide payment info to the agencies while some do not. So, if you’re looking to improve or maintain credit scores, BNPL may not be the answer. On the other hand, BNPL can negatively impact credit scores if you miss any payments and they end up in collections. 


If you do opt for a BNPL plan for a purchase this holiday season, you must have a rock-solid payment system in place to ensure you’ll pay ALL your bills (not only BNPL) on time. Be sure to adjust your budget so you know the money to make the payments will be available, and in the account from which you’ll make your BNPL loan payment. If you don’t already have a simple budget in place, this is the time to create one. You need to know just how much money is coming in and when, and when all your expenses are scheduled to be paid. 


The bottom line 

BNPL can make sense for some people in some situations. But since the payment period is generally six weeks, it’s worth seeing if you could make the same purchase with a credit card and make the full payment on time – or wait until you can purchase the item in full. Consider, honestly, if paying for an item over six weeks can really help you financially. 

The blog articles published by Unlock Technologies are available for informational purposes only and not considered legal or financial advice on any subject matter. The blogs should not be used as a substitute for legal or financial advice from a licensed attorney or financial professional. Links in our blog posts to third-party websites are provided as a convenience and are for informational purposes only; they do not constitute an endorsement of any products, services or opinions of the corporation, organization or individual. Unlock Technologies bears no responsibility for the accuracy, legality, or content of external sites or that of subsequent links.