The pros and cons of buy now, pay later

What is buy now, pay later?

Buy now, pay later (BNPL) schemes allow you to spread the cost of a purchase. This could be especially helpful when you’re buying big-ticket items, such as a laptop or sofa. It means you can break down the cost of expensive purchases into more manageable chunks.

Sometimes known as deferred payment credit (DPC), buy now, pay later is a type of borrowing. The schemes typically offer interest-free options, as long as you stick to the payment terms. These terms aren’t usually set by the retailer you’re buying from, but the BNPL provider – some of the best-known of which include ClearPay, Klarna and PayPal Credit.

How does buy now, pay later work?

When you come to pay at the till or online checkout, you can select the option to pay using the retailer’s chosen BNPL partner. If you haven’t used the scheme before, you’ll need to set up an account with the provider, which often involves a soft credit check.

If you’re accepted onto the scheme, the BNPL provider pays for the item, and you pay it back at a later date. This generally works in one of two ways:

• Pay later – you pay the BNPL provider the full amount owed at a set point in the future, typically between 14 and 30 days after the transaction

• Instalments – you pay back smaller slices over several months.

Different schemes offer different terms, so – as always – it pays to read the small print.

Some banks also offer BNPL-style services. But with these you may also have to pay a fee or interest when paying in instalments, particularly if you opt to pay the balance back over a longer period.

The interest rates can be quite high, with representative APRs of up to 29%, or even higher if you have a poor credit record.

Does using buy now, pay later affect your credit score?

When you apply for buy now, pay later, the provider may carry out a credit check on you to assess your eligibility. But most will only perform a soft credit check – which means they’ll look at your credit report without leaving a mark that’s visible to other credit providers. Only hard checks (which do leave a mark) affect your credit score.

If you always make your payments on time, using BNPL shouldn’t negatively impact your credit score. But if you miss a payment, this information could be passed on to credit reference agencies and your credit score could be affected. This could make getting credit harder in future.

Who offers buy now, pay later?

When BNPL was first introduced in the UK, only a handful of specialist providers offered buy now, pay later schemes – namely Clearpay, Klarna and PayPal Credit.

A handful of banks including Monzo then followed suit, but both NatWest and Virgin Money have since withdrawn the feature for new customers.

Here’s how some of the main operators work:

ClearPay

ClearPay lets you pay in four interest-free instalments over six weeks. You'll need to download the app to sign up, and can then add it to your Apple or Google Wallet.

If you miss a payment, ClearPay charges £6 for each late instalment and a further £6 if it’s still unpaid seven days later. The late fee is capped at £6 for orders under £24. For orders over £25 you could pay 25% of the order value – so make sure you stay on top of your repayments.

• Accepted: online and in-store

• Purchase protection? No

Klarna

Klarna partners with more than 41,000 retailers in the UK.

It offers two main options, which are usually presented when you come to pay:

• You split the cost of your purchase into three interest-free payments, making the first payment when you buy the item. The following two are taken automatically 30 and 60 days after that

• Alternatively, you can choose to pay up to 30 days later.

There are no fees or interest if you pay on time.

• Accepted: online and in-store

• Purchase protection? Klarna’s Buyer Protection Policy can pause your payment for 21 days if you report a return

Klarna also offers a buy now, pay later credit card. You can use it anywhere Visa is accepted and pay right away or in instalments. There’s no monthly fee for using the card, and you can choose between a virtual or a plastic card.

However, if you need a little more time to pay, or want to spread payments over three, six or 12 months, there is a fee and you’ll be charged interest at a rate of 27.9%.

There’s also a £5 fee for late payments. To avoid this it’s worth using Klarna’s Autopay feature or setting reminders so you stay on top of your payments.

• Accepted: everywhere Visa is accepted, in stores and online. You can also use Klarna Card abroad without additional exchange fees from Klarna

• Purchase protection? Yes, on goods or services between £100 and £30,000.

Monzo Flex Card

Monzo Flex lets eligible customers spread the cost of £100+ purchases over three interest-free monthly payments. You could also split the purchase over a longer period, ranging from six to 24 months, but check your personalised interest rate before opting to do this as it may be pretty high.

You can also move purchases from your Monzo Current Account to Flex up to two weeks after you’ve bought an item.

If you miss a payment, you may lose the 0% rate on existing purchases, Monzo says.

• Accepted: online and in-store

• Purchase protection? Yes, on goods or services bought using a Monzo Flex card and costing between £100 and £30,000

PayPal Credit

PayPal Credit describes itself as ‘a credit card without the plastic’. There are three options to choose from depending on how much you spend and where:

• 0% interest for four months on purchases over £99

• 23.9% APR on purchases under £99

• Monthly instalment plans lasting six to 48 months available at selected online stores.

You can apply online on the PayPal Credit website. You'll need a PayPal account, but you can sort that out when you apply if you haven't already got one.

• Accepted: online only, in all currencies that support PayPal

• Purchase protection? PayPal’s Buyer Protection programme entitles you to reimbursement for the full purchase price of an item plus the original shipping costs if you don’t receive an item from a seller, or if the item isn’t what you wanted. PayPal’s website explains which items aren’t covered.

Virgin Money Slyce (not currently accepting applications)

Virgin Money Slyce’s maximum credit limit is £3,000, which is higher than some alternative options. But if you decide to use that much, make sure you can afford to pay it back on time.

Virgin Money Slyce offers monthly payments to suit your budget and help improve your credit score.

A monthly spend of £30 or more can be put into an instalment plan and split over three, six, nine, or 12 months.

If you pay in three months, there's no fee. For longer plans of six, nine and 12 months, an instalment fee is added. This is a percentage of the total amount you owe.

Any monthly spend under £30 needs to be paid in full.

• Accepted: in-store and online

• Purchase protection? Yes, on goods or services costing between £100 and £30,000

At the time of writing (3 February 2025), Virgin Money wasn’t accepting new applications but the service was still available to existing customers.

What are the pros and cons of buy now, pay later?

As with any form of finance, BNPL comes with a whole host of pros and cons:

Pros:

• You don’t have to wait until payday if you need to make an essential purchase

• If you're shopping online, you only need to pay for what you keep. So, if you frequently return things, you don't have to pay for them and await the refund – as long as you return items promptly

• When money is tight, BNPL can be a useful way of spreading the cost of major purchases

• Unlike most credit cards and loans, buy now, pay later schemes can be interest-free for a set period

• Lots of retailers now offer BNPL options on their sites

• It’s easy to manage your account on an app.

Cons:

• BNPL can make it more tempting to buy things you can’t afford

• If you use several BNPL providers, it can be hard to keep track of what you owe, and when it needs to be paid back

• If you miss a payment, the fees and interest payments can be extremely high

• A missed payment could affect your credit score

• Not everyone is accepted for finance – if your credit rating is bad, you may get turned down

• There may be other, better finance options available to you, such as an interest-free credit card

• Many retailers only partner with one or two BNPL providers so you may end up joining multiple schemes, and having to keep on top of debt in several different places

• Many BNPL services are unregulated, so you can't complain to the Financial Ombudsman if something goes wrong.

Buy now, pay later or credit card: which is best for me?

The right option for you will depend on a number of factors. Here are a few differences between BNPL and credit cards to bear in mind:

• Buy now, pay later may allow you to make weekly payments

• BNPL often calls for an upfront payment, whereas credit cards allow you to defer the whole cost

• Buy now, pay later credit checks may not be as stringent as those for credit cards

• With credit cards, you may incur other costs, such as annual fees

• Credit cards are accepted at more retailers. Not all shops will offer buy now, pay later from your chosen provider

• Credit cards may offer more protection if things go wrong

• Credit cards may offer rewards, such as air miles or cashback, which you don’t typically get with BNPL.

What happens if I can't make the repayments?

Missing payments is a bad idea, as it could result in:

• A late payment fee

• Being barred from using BNPL in the future

• Your credit rating being affected – this could make it hard to get a loan, mortgage or credit card in future.

If you think you might miss a repayment, contact your BNPL provider as soon as possible. Some will allow you to delay or freeze repayments. Alternatively, some may switch you to a longer plan with lower regular payments – however, this may incur interest.

Top tips for shopping safely with buy now, pay later

Used responsibly, BNPL can be a convenient way of accessing short-term, interest-free credit. But it does come with risks.

Perhaps the biggest is that you may be tempted to spend more than you can afford, and missed payment penalties can be heavy. There’s also less consumer protection.

Here are our top tips to help you shop safely and keep on top of your BNPL spending:

• Set up reminders or automatic payments – this will be especially helpful if you're using more than one BNPL scheme

• Set yourself a limit – setting a spending limit each month will help ensure you can pay it all back on time

• Update your budget regularly to include your repayments

• Don't borrow more than you can afford to pay back – and consider carefully whether you'll be able to continue making your payments if you borrow more either using BNPL or other forms of credit

• Return unwanted items promptly – you don't want to be paying for something you’re planning to send back.