Compare ‘buy first, pay later’ services

news7g04/07/2023

2 4 minutes read

Paying your credit card balance in full each month is one of the 10 commandments of credit at TPG — not just for your travel rewards success, but also for smart personal finances.

However, there may be times when you need to pay off over time for larger purchases and don’t want to pay high interest rates for the ability to do so. Enter “Buy now, pay later,” or BNPL, services.

Compare services buy now, pay later

Most BNPL services work similarly. They make a soft credit check to help you qualify and determine your spending limit, there is no interest charge and requires you to make the first payment at the time of purchase. Typically, you’ll have three payments left, due every two weeks. You can usually get instant approval at checkout. And some services offer virtual cards to add to your phone’s digital wallet for in-store payments.

With so many BNPL services available, it can be difficult to distinguish between them and decide which one to use. Notable differences between the services include purchase limits, whether or not late fees are charged, and whether you can pay in monthly installments (but you’ll often have to pay interest on this option). We reviewed Affirm, Postpay, Klarna and PayPal, the top four services by one research by C+R Research. Since the original publication of this article, Apple Pay then launched; we added this option as the fifth option in our comparison.

Confirm

How it works: “Pay in 4” by making four payments (every two weeks) or choose a monthly installment plan. You can pay anywhere, even in-store, with a single-use virtual card.
Payment method: Bank accounts, debit cards, credit cards (but only for some purchases), mailed checks.
Purchase Limit: Up to $17,500.
Credit check: Soft. Payment history, including past due payments, may be reported to Experian.
Care about: No interest for Pay in 4 package; 0%-36% for monthly payment plan.
Late fee: Do not have.

Apple Postpaid

How it works: Make the first payment on purchase, then three additional payments over six weeks.
Payment method: Debit card.
Purchase Limit: Up to $1,000.
Credit check: Soft; Payment history can be reported to credit bureaus.
Care about: Do not have.
Late fee: Do not have.

Postpaid

How it works: Choose a payment plan of four interest-free payments (with the first due at purchase) or monthly installments over six or 12 months. In-store payments are also available with select merchants.
Payment method: Bank account, debit card, credit card. Monthly installments can only be paid by debit card.
Purchase Limit: Spending limits start at around $500 and increase over time.
Credit check: Soft.
Care about: No quadruple payment option; varies by monthly installments.
Late fee: Limited to 25% of purchase price.

Klarna

How it works: “Pay in 4” with four interest-free payments, paid every two weeks. Additional options include an interest-free “Pay in 30 Days” plan and a monthly plan with flexible financing. Shop online and pay with the Klarna app. To pay in-store, you can create a single-use card and add it to your phone’s digital wallet.
Payment method: Bank account, debit card, credit card.
Purchase Limit: There is no predefined spending limit. An automatic approval is made with each purchase.
Credit check: Soft for the Pay in 4 option. Hard for the monthly financing option.
Care about: No Pay in 4 or Pay in 30 options; The APR varies on monthly plans.
Late fee: For the Pay in 4 option, up to $7 can be charged for late payments after 10 days (not to exceed 25% of the installment payment amount).

PayPal

How it works: The “Pay in 4” option requires the first payment to complete the purchase, followed by the remaining three payments (biweekly. Or use the newer “Monthly Payments” plan, where the cost is broken down into monthly payments over a period of 6 to 24 months, with the first payment due one month after purchase.
Payment method: Bank account, debit card, credit card (your PayPal balance cannot be used for reimbursement and credit card cannot be used for Monthly Payment).
Purchase Limit: $30-$1,500 for Payment in 4; $199-$10,000 for Monthly Payment.
Credit check: Soft to pay in 4; The monthly payment does a soft check for prequalification and hard claim once the customer accepts the loan and moves on with the financing options.
Care about: No payments in 4; 9.99%-29.99% for Monthly Payment.
Late fee: Do not have.

Should you use buy now, pay later?

The simplicity of paying off a purchase in four payments and not paying any interest is appealing.

If you want to maximize points and miles earned, BNPL is not the ideal solution. Although many services allow you to link a credit card to pay off debt, you will lose any category bonus you may have gotten from shopping directly with the seller.

Also, using one form of debt to pay off another is unwise, especially if you can’t pay the charge on your credit card when the bill is due.

Besides, C+R research found that many people used the BNPL service to buy items that they could not afford. This creates debt, adds interest, and can negatively affect you. Credit report.