The Best Buy Now, Pay Later Services

Customers want to make purchases easily and conveniently. That's why retailers strive to have multiple payment options in their outlets and online stores.

Credit cards and mobile wallets are the dominant e-commerce payment methods, with each holding a 30% market share. However, Buy Now, Pay Later (BNPL) solutions are rising with a 2% market share in the United States.

The BNPL lending market was estimated to be worth a few billion US dollars in 2019, but this is forecasted to grow by 1,200% by 2024.

The growth of any market is often because of the rise of multiple solid individual players. This is true for BNPL solutions, as customers have a few key options to look at today.

This article dives deep into the best Buy Now, Pay Later sites available today and discovers their good and bad traits. At the end of it, you'll understand what the different BNPL sites are about and how they work, so you’ll be better positioned to pick the most suitable BNPL option for you.

What is a Buy Now, Pay Later service?

The Covid-19 pandemic affected many global operations, but a few winners emerged from it. Due to financial uncertainty and the tendency of customers to be cautious with their spending, Buy Now, Pay Later loans became popular, with many retailers adding them as a payment option.

A Buy Now Pay, Later service is an arrangement that lets customers purchase goods and pay for them in installments. It's available for in-store and online purchases, depending on the retailer.

Essentially, customers buy the goods on credit but spread the payment over a certain period, usually interest-free. They pay a down payment at the point of purchase and take the goods with them — a key selling point of this service.

From the retailer's end, the entire model works like this:

  • A BNPL firm partners with a retailer.
  • The retailer lists the specific BNPL service as a payment option.
  • Customers visit the retailer's store (online or physical) to purchase goods, and they select the BNPL option as payment during checkout.
  • Payment is completed; the customer takes the goods and pays for them in installments.

While all BNPL services share this basic model, the individual terms and conditions are different. They all allow you to take goods at the point of purchase and pay for them over time, but the costs of using the service, how the installments are spaced out, and potential penalties vary.

Because of this, pay attention to the specific terms and conditions of any BNPL service before you use it at checkout. We'll break down the top BNPL services available today and their defining features to help you select a suitable one.

Common BNPL Lenders

Best BNPL services

The growth in popularity of BNPL services has led to a surge of players in this niche. Customers looking for the best service can easily be confused by the wealth of options and land on an unsuitable one.

Let’s break down the top BNPL sites.

Affirm

Affirm was one of the first BNPL services to show up in the market with its inception in 2012. It started as a financial technology company branching from a startup studio and launched its consumer lending service in October 2017.

Graphic showing traveler searching for shopping options on his phone

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Today, Affirm has been used to complete 17 million purchases, with $0 in late fees charged to customers.

This BNPL service's main selling point is that they give you an accurate picture of what you owe and when you'll pay the outstanding installments with no hidden fees.

You can choose Affirm as the preferred payment option in multiple eligible stores across the United States.

The different payment options available at Affirm include:

  • Applying for a purchase loan whose payments are spread out over a 3, 6, or 12-month period, with a provision for extended periods under certain circumstances.
  • Buying goods and making four equal payments every two weeks.
  • Applying for an Affirm loan loaded on a virtual card and using this to pay for purchases in most online and physical stores.

Affirm negotiates with retail outlets individually, explaining why the APR on purchases varies. A few stores charge as low as 0% APR on select purchases.

Thumbnails of retailers that accept Affirm

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To check if your preferred store is supported by Affirm, you can search their retailers on their homepage. You'll also see if it's among the ones that offer 0% APR.

You do have to hold an account with Affirm to use their service. Signing up for one is easy and can be completed at the point of purchase, but it's safer to create one before you shop.

Affirm runs a brief credit check to determine how much you qualify for, which helps you avoid any surprises at checkout. This eligibility check doesn't affect your credit score.

When buying with Affirm:

  • Confirm that your favorite store accepts Affirm for payment.
  • Shop for items and select Affirm as the payment option during checkout.
  • The loan payment options will appear differentiated by what repayment period you want — pick a suitable one for your budget.
  • Complete the payment.
  • Use the Affirm app or web platform to manage your payments and see how much is owed.

If you don't want to miss payments, set up the "Autopay" feature for a specific purchase.

Affirm Pros

  • Transparent terms
  • Eligibility check doesn't affect credit score
  • Accepted as payment in multiple stores
  • Loans available for up to $17,500
  • No late fees
  • No down payment required

Affirm Cons

  • APR can be as high as 30%
  • Requires a soft credit check

Klarna

Klarna is a Swedish-based fintech company established in 2005. Its focus was on payment processing but now offers BNPL loans as its flagship product. It has 25 million users in the United States and 147 million globally spread out in 45 countries.

Graphic showing Klarna's Pay in 4 solution

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Klarna's BNPL options are:

  • Klarna Pay in 4: Payments are divided into four equal installments due every two weeks. There’s 0% interest, but you need to pay 25% of the total purchase amount as a down payment at the point of purchase.
  • Pay in 30 days: Order goods and get a 30-day window to try them out before paying the balance at the end of the period. Only pay for what you're satisfied with and return the rest. This plan is available with select retailers.
  • Monthly financing: A partnership with WebBank where purchase payments are spread over up to 36 months, at a standard APR of 19.99%. This plan attracts no annual fees, but late payment fees of up to $35 can be applied.

For other stores not available on Klarna's platform, you can create a virtual credit card and use it at checkout.

To enjoy these plans, sign up for an account with Klarna, where you'll see all due payments and manage them. Klarna has a loyalty program called Vibe, where shoppers earn points and get rewards for using their service.

Klarna's Pay in 4 may attract a late fee of up to $7 if a scheduled payment isn't received within ten days.

The amount of money you are eligible for is based on a soft credit check done when you sign up for an account. Your personal purchase history with Klarna also determines how much you can get. The soft credit check doesn't affect your credit history since it doesn't appear as an inquiry on your report.

The long-term financing option requires a hard credit check which appears on your report.

Klarna Pros

  • Multiple loan options available
  • Pay in 4 and 30-day financing attracts no interest
  • Virtual credit card expands shopping options
  • Soft credit checks don't affect your credit report.

Klarna Cons

  • Late payments attract fees
  • Pay in 4 requires a downpayment
  • Late payments are reported to credit bureaus.

PayPal Pay in 4

Paypal, the global payments giant, joined the BNPL bandwagon in August 2020. The product, Paypal Pay in 4, is a short-term loan designed to give customers an option to spread payments for purchases in 4 equal installments.

Graphic showing PayPal's Pay in 4 solution

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This service is available to millions of online retailers for purchases between $30 and $1,500. The payments are spread over a six-week period, where you pay 25% as a downpayment and the remaining installments every two weeks.

Customers pay no interest or fees to access this service. Payments are automated seamlessly on their PayPal account, where they can view balances and manage the loan.

Paypal Pay in 4 is a secure payment method backed by Paypal, a global leader in secure online payments. Eligible customers are those with a Paypal account in good standing, and Paypal also conducts a soft credit check.

Late payments attract charges that vary from state to state.

To access this BNPL loan:

  • Sign up for a PayPal account.
  • If you already have one, choose PayPal as the preferred payment method at checkout.
  • Choose "pay later" and see how much is due after every two weeks.
  • The down payment will be deducted and initial payment completed.
  • Complete the remaining installments to pay off the loan.

Paypal Pay in 4 Pros

  • Millions of online purchases accept PayPal
  • Interest-free loan repayments
  • The loan is backed by Paypal

Paypal Pay in 4 Cons

  • Limited loan repayment options
  • Loans are capped at $1,500
  • Late payments attract a fee depending on the state.

Afterpay

Afterpay was established in 2014 in Sydney, Australia, and has become one of the top BNPL services globally. It has millions of customers across Australia, the United States of America, New Zealand, the United Kingdom, and the European Union.

Graphic of Afterpay website

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Over 85,000 retailers accept Afterpay as a checkout method. Their BNPL proposition is a pay-in-4 service, where customers can spread payments over four installments.

To use Afterpay:

  • Sign up for an account on their platform. It's free, and you'll instantly know if you are approved or not.
  • When shopping online, select Afterpay as the preferred checkout option.
  • Set up a virtual card on the Afterpay App if you're shopping in-store. Use this card as you would a regular card at checkout.

Afterpay credit limits start at $500, which is the limit most new accounts get on sign-up. From here, the limit gradually increases depending on usage and how you pay back the loan.

Afterpay doesn't report your borrowing and payment history to credit bureaus. Good payment history won't improve your credit report, while late repayments won't hurt it either.

If you don't repay the loan in good time, your account will be frozen, and you won't be able to take any more loans. Late payments attract a fixed $10 fee and an additional $7 if you don't clear the balance within seven days. Late fees are capped at 25% of the total purchase amount, so small purchases cannot attract huge fees.

Afterpay Pros

  • No interest on loans
  • Late fees are capped at 25% of the original purchase amount
  • It doesn't require a credit check.

Afterpay Cons

  • Charges late fees
  • Limited BNPL options.

Splitit

Splitit was established in 2012 and offers a unique proposition in the Buy Now, Pay Later space. Its product is for diligent credit card users who make all their payments in good time.

Graphic showing Splitit website

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Unlike some other BNPL services here, it has no credit check, no interest, no charges, and no fees to use the service. The loan uses your credit card.

But how does it work?

Splitit will check if your card has enough credit to pay for the whole amount when buying goods. This is the first authorization step. If this goes through, it'll charge you the first installment. It'll then place a pre-authorization hold on your credit card for the installments you chose to pay over the said period. That hold will reduce as you pay the installments.

Assume you want to buy goods worth $800, spread over ten installments of $80 each. Splitit will check if your credit limit is above $800 and charge only $80. The remaining nine installments will appear as pending transactions on your statement, due to be completed every month.

To use it when shopping:

  • Choose Splitit as the preferred payment option at checkout.
  • Select the number of installments, usually between 3, 6, 12, and 24.
  • Key in your credit card details.
  • Complete the payment.

Split combines the best of BNPL services and credit cards since you enjoy all the benefits of using your card to make purchases, such as cashback, loyalty points, and rewards.

Splitit Pros

  • No late payments
  • Interest-free
  • No application process or credit check
  • Buyers are still eligible for rewards specific to their credit cards.

Splitit Cons

  • Limited payment options
  • Partners with a limited number of retailers
  • Places a hold on your credit card
  • Retailers determine the minimum and maximum values one can purchase using Splitit.

Zip

Zip, formerly Quadpay, is a financial company that operates across four countries, partnering with over 26,000 merchants.

Graphic showing Zip Pay website

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It has two main products – Zip Pay and Zip Money.

Zip Pay is their BNPL service that offers interest-free payments for purchases up to $1,000. Repayments start from as low as $10 per week.

Zip Money is a credit card line with limits of over $1,000. Limits go up to $5,000 for regular accounts and $50,000 for specific merchants.

Their main BNPL service, Pay in 4, splits purchase amounts into four equal installments, due every two weeks. You have to pay 25% of the total amount as a downpayment at the point of purchase and then complete the remaining installments within six weeks.

To use Zip Pay for online purchases:

  • Create an account on the Zip web platform or App. It'll conduct a soft credit check and determine how much you're eligible for.
  • Search for your favorite store and add items to the cart on the Zip account. At checkout, select Pay with Zip.
  • Confirm the total purchase amount is correct and the payment schedule is appropriate.
  • Complete the payment.

For in-store purchases:

  • Choose the in-store tab on the App and key in the amount you're looking to spend.
  • Confirm the amount and proceed to review the repayment schedule for this amount.
  • Zip will generate a virtual credit card that you can add to your mobile wallet to complete purchases when you buy items at a store.

The Zip app sends friendly reminders to make sure you don't miss out on any payments. Late payments attract an initial $8 penalty and a subsequent $8 penalty for every week you don't complete the payment. These charges are capped at $40.

Zip Pros

  • Multiple loan options.
  • Interest-free loans.
  • Zip Money offers loans for huge purchases that go up to $50,000.
  • Easy to sign up and get approval.

Zip Cons

  • Late fees.
  • Late payments are reported to credit bureaus.

Perpay

Perpay is a financial services provider established in 2014 with over 3 million customers. Perpay, like the BNPL services discussed so far, allows customers to complete purchases and pay for them over time, but it has one important difference: it helps you build credit.

Screenshot of the Perpay website

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It belongs to a unique set of BNPL services that help you build credit. Most BNPL providers don't report timely repayments to credit bureaus.

But, as Perpay notes, timely payments can improve your credit score. Its customers noticed an average increase of 39 points within 6 months, which is perfect for anyone with bad credit looking to improve.

Perpay deducts payments from your paycheck, which forms the basis of the initial spending limit you get. To check the limit, upload your pay stub on the Perpay platform.

All payments are made by a small direct deposit from your paycheck, which is aligned to your pay cycle. To complete purchases, you'll need to pay at least one installment. You can split payments through different accounts if you juggle multiple jobs.

Note that the credit building feature isn't available automatically, and you'll need to activate Perpay + to access it. In addition, Perpay reports payments after you complete on-time payments for four months, and they should exceed $200. Poor-performing accounts may not qualify for the credit building feature.

To use Perpay:

  • Create an account to get a spending limit.
  • Check the marketplace for eligible brands to shop from.
  • Checkout and complete payments that go to the Perpay team for approval.
  • The team sets up a Perpay deposit system over the number of installments you choose.
  • The order will be processed for shipment once the first payment is made.

Perpay Pros

  • Helps build credit
  • Payments are deducted from your paycheck, which keeps things simple
  • Net pay determines the spending limit
  • No credit limit check required

Perpay Cons

  • Limited to a few retailers
  • Approvals aren't instant
  • Not all loans qualify for the credit building feature.

Pros and cons of BNPL loans

We’ve covered some of the top BNPL services in the market today, and they share many similarities. Save for a few with different models, they all offer convenient and quick access to loans that fund purchases and allow you to pay over time.

BNPL solutions are often compared to credit cards, which people were used to before these loans became popular. Most of their pros and cons stem from how they compare to credit cards.

Customers' preference between BNPL and credit cards

They include:

Pros of BNPL loans

  • Instant access: BNPL loans are available to customers at the point of purchase and offer swift approvals in minutes. Credit cards have a sophisticated application process and take longer to approve.
  • Easy to use: BNPL loans are integrated with most retailers' checkout systems to make them easy to use.
  • Multiple payment options: Most BNPL services offer customers flexible payment options where they can spread installments through a specific period.
  • Low interest: Most BNPL loans offer some zero-interest payment options, often for the short-term pay-in-4 plans. Other plans charge low-interest rates, which makes them a better choice than a high-interest credit card.
  • No hard credit check: BNPL services are perfect for people with bad credit since the companies don't perform a hard credit check. Most will do a soft one, with others not requiring any checks.

Cons of BNPL loans

  • Impact of missed payments: Missed and late payments are bad since they are reported to credit bureaus and attract late payment fees for most of these loans.
  • Interest rates: Some BNPL services, like Affirm, charge a high APR of up to 30% for specific retailers, making it an expensive option.
Common BNPL loans issues

How to choose the best BNPL service

The wealth of options in the BNPL niche can make it tricky to choose between them. And your experience with these services hinges a lot on whether you pick the right one.

If you're looking to explore a BNPL service for making purchases, don't rush over the fine print as there's no perfect one. It all depends on your financial situation and whether the terms of the service align with it or not.

Factors to consider in a BNPL service

First, look at the cost of the loan. The whole point of a BNPL service is to get a cheaper financing option, so you don't want to be paying a lot to use the service. The cost goes beyond interest rates, as late repayment and processing fees associated with using the service come into play.

Look at the service holistically and see how much you'll pay back if you borrow $1,000 of credit. Once you determine this for each provider, it's easier to see which one actually has the best cost for your budget.

Additionally, the repayment terms are critical. Look at how this works with respect to your income schedule. If you earn every week, the pay-in-4 option might work for you, but if you earn monthly, it might not. Find a schedule that aligns with your payment schedule to avoid missed payments.

The loan period also plays a key role here.

Customers prefer to pay over one month than two weeks

Also, look at customer service and ease of use. You want a loan that's accessible and has a friendly platform you can use to check and manage payment schedules.

Lastly, understand the good and bad of your preferred BNPL service, and be ready to live with the consequences. This helps you know what you're signing up for and avoid any nasty surprises.

Conclusion

BNPL services have revolutionized the retail space, as customers have a different option to turn to if credit cards don't work for them. The growth of this niche will continue, and we expect to see more prominent players emerging here.

As a customer looking for convenient and flexible ways to pay for purchases, always do some digging before using any of these services. The fine print will give you a clear picture of what you're signing up for, so don't skimp over it.

If you're looking for additional ways to save on purchases, check out CouponFollow for a collection of coupons you can use when shopping at your favorite retail outlets.

about the author

Marc Mezzacca
Marc Mezzacca is CEO of CouponFollow, a consumer savings engine that surfaces popular coupons. He has been in the coupon and deals industry for over a decade with a deep interest in evolving e-commerce technologies.