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.
Almost half (48%) of UK adults use at least one BNPL provider, according to 2026 Compare the Market research. However, new regulations have changed how these products work, with affordability checks, stronger consumer protections and greater oversight of lenders now in place.
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.
Under the new rules, providers will need to check that you can afford to make the repayments before offering you credit. This means some people may be turned down if the provider believes the payments might be difficult to manage.
You should also be given clear information about how the agreement works, including when payments are due and what could happen if you miss one.
If your application is approved, 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 vary significantly depending on the lender, product and your individual circumstances, 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?
The new FCA rules mean BNPL providers must now carry out full affordability checks – not just when you sign up, but for purchases too. Most of these will still be soft credit checks, which means they won't leave a mark on your credit file that other lenders can see. (Only hard checks, which do leave a mark, affect your credit score.)
However, providers will now share your repayment data with credit reference agencies, so your BNPL usage and repayments are more likely to show up on your credit file than before.
Keeping up with your BNPL payments has always been important for avoiding penalties, but it will become even more crucial for protecting your credit score under the new rules.
If you always make your payments on time, using BNPL shouldn’t negatively impact your credit score – in fact it could help to build your credit history, which can be useful. 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 .
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 £24 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? Yes, on most goods or services between £100 and £30,000, now Clearpay is FCA-regulated
Klarna
Klarna partners with more than 41,000 retailers in the UK and offers several ways to pay:
Pay in 3: split the cost of your purchase into three interest-free payments – the first at checkout, the next two 30 and 60 days later
Pay in 30 days: shop now, pay in full within 30 days, interest and fee-free if you pay on time
Financing: spread the cost over 6-24 months
There are no fees or interest if you pay on time.
Accepted: online and in-store via the Klarna app's digital card or QR code at partnering physical shops
Purchase protection? Yes, they carry Section 75 protection on eligible purchases, regardless of whether you bought online or in-store. Klarna's Buyer Protection Policy – including the 21-day payment pause for returns – only applies to online purchases.
Klarna also offers a Klarna credit card, usable anywhere Visa is accepted. 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 most goods or services between £100 and £30,000.
Monzo Flex
Monzo Flex lets eligible customers spread the cost of £100+ purchases over three interest-free monthly payments or in up to 24 monthly instalments if you need longer – though anything beyond the three-month option carries interest, up to 29% APR (variable).
Monzo also offers a second card, Flex Build, aimed at those building their credit history. This has a lower credit limit (up to £750), a higher representative APR of 39% (variable), and a possible security deposit depending on your credit history.
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.
Accepted: online and in-store, anywhere Mastercard is accepted
Purchase protection? Yes, on most goods or services bought using a Monzo Flex card costing between £100 and £30,000
PayPal
PayPal Pay in 3 lets you split a purchase of £20 to £3,000 into three interest-free payments – the first at checkout and the next two automatically each month after that, with no sign-up or late fees.
PayPal Credit is a separate, longer-standing credit line linked to your PayPal account, rather than a BNPL split. It offers 0% interest for 4 months on purchases of £99 or more, then a representative APR of 23.9% (variable) on anything below that or left over after the 0% period.
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: PayPal Pay in 3 is online only; PayPal Credit is both online and instore
Purchase protection? Both Pay in 3 and PayPal Credit are covered by PayPal Buyer Protection, and carry Section 75 protection on eligible purchases between £100 and £30,000
Zilch
Zilch works a little differently from other providers: once you sign up and are approved, you get a virtual Zilch card (which works anywhere Visa is accepted) with a personalised credit limit.
There's no interest, but some purchases carry a small fee depending on how you pay and where you shop – there are thousands of fee-free stores in the app, and you'll always see any fee before you confirm.
Zilch offers several ways to pay:
Pay now: pay in full and earn up to 5% back in Zilch Rewards, which you can put towards future purchases.
Pay over 6 weeks: pay 25-50% upfront, then the rest over the following six weeks. Fees apply.
Pay monthly: spread the cost over 3, 6 or 12 months, subject to eligibility. Fees apply.
One thing that makes Zilch a bit different from many other providers is that it doesn't charge late fees or interest on missed payments. But missing a payment deadline could still affect your credit score, and you won't be able to make new Pay over time purchases until you've paid what you owe.
You can delay eligible instalments for a few extra days, though a fee may apply.
Accepted: online and in-store anywhere Visa is accepted (via your digital wallet, the app, or a physical card).
Purchase protection? Section 75 protection applies to Pay over 6 weeks and Pay over 3 months purchases of £100-£30,000.
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:
Most BNPL providers are now FCA-regulated, giving you stronger protections and access to the Financial Ombudsman Service if something goes wrong
You don’t have to wait until payday if you need to make an essential purchase
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 has access – now that providers run affordability checks, you may get turned down more often than before, especially if your credit rating is bad
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.
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
With credit cards, you may incur other costs, such as annual fees
BNPL now offers similar protection to credit cards if things go wrong, including Section 75 cover on most purchases between £100 and £30,000, and access to the Financial Ombudsman Service
Credit cards may offer rewards, such as air miles or cashback, which you don’t typically get with BNPL – though some BNPL providers now offer their own rewards or cashback schemes too
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. Now that most providers are FCA-regulated, they're required to treat customers in financial difficulty fairly. This means they may allow you to pause or freeze repayments, direct you to debt advice, orswitch you to a longer plan with lower regular payments (but this may incur interest).
If you're unhappy with how a regulated BNPL provider has handled your situation, you can now escalate a complaint to the Financial Ombudsman Service if you can't resolve it with the provider directly.
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. Now that most BNPL providers are FCA-regulated, you'll benefit from stronger protections than before – but it's still a form of borrowing, and the same spending risks apply regardless of regulation.
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.
FAQs
Is buy now pay later regulated?
Yes: since 15 July 2026, most BNPL providers in the UK have become regulated by the FCA. This followed a government decision to bring what's officially called ‘deferred payment credit’ (DPC) into the FCA's regulatory parameter, giving consumers stronger protections including affordability checks, support for those in financial difficulty, and access to the Financial Ombudsman Service.
Some BNPL products remain outside this regulation – for example, where the lender and the retailer are the same company rather than a third-party provider – so it's worth checking the specific provider's terms if you're unsure.
Are my purchases protected with BNPL like they are with credit cards?
Since 15 July 2026, most mainstream BNPL providers – including Clearpay, Klarna's Pay in 3 and Pay in 30, and PayPal's Pay in 3 – are FCA-regulated. This means most goods and services costing between £100 and £30,000 are now protected under Section 75 of the Consumer Credit Act, the same as with a credit card.
How do buy now, pay later schemes make money?
BNPL companies make their money from the retailer, rather than the customer.
By offering BNPL, the retailer may find customers spending more or not having to wait until payday to make a purchase. This is all good for business.
BNPL providers also make money from late payment fees and interest charges.
Will I be accepted for buy now pay later if I have bad credit?
It’s possible, although if you have too many black marks on your credit record, you may be turned down.
Now that most BNPL providers are regulated, providers will carry out similar affordability checks to other credit providers. This means that it may be tricky to be accepted for BNPL if you have bad credit.
Does using buy now, pay later build my credit score?
Like any form of credit, BNPL could help build your credit score if managed responsibly. However, this depends on whether your provider reports repayment data to credit reference agencies, so it's worth checking its terms.
Missed payments are more commonly reported, and could negatively impact your credit score.
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Allie has spent her career helping people quickly understand complicated topics, to help them save money and focus on what matters. With almost 10 years’ experience writing, leading and managing content, she is an expert in personal finance and insurance products.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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What our expert says...
Buy now, pay later used to feel separate from the rest of your credit history. That's changing. With providers now expected to check affordability and start reporting repayments, it's worth treating BNPL exactly like any other form of credit: something that shows up if you fall behind, not just a checkout convenience.