Buy Now, Pay Later programs, also known as point-of-sale installation loans, have made a name for themselves in the last three years. BNPL programs offer appealing short-term financing options on online purchases, with some offering in-store options when connected to mobile payment options like Apple Pay. Most programs are interest-free and do not typically affect credit scores if payments are made on time.

The process offered by BNPL programs isn’t new to consumers, but it is a process that is more common with larger purchases like homes and cars. These programs bring a similar, though much simpler and trimmed-down version of that process to smaller, everyday purchases like clothing, plane tickets, electronics and even groceries. These options offer convenience when necessary purchases arise suddenly and cash or credit limits are barriers to making a purchase, but are they too good to be true?

How do Buy Now, Pay Later programs work?

In most cases, the total purchase amount is divided into quarters paid in two-week installments, with the first quarter due at the time of purchase. For example, a $100 purchase would be separated into four $25 payments made every two weeks for six weeks, beginning with an initial $25 payment. For larger purchases, monthly payment options typically come with interest and are paid over 12 or 24 months.

What to consider when deciding whether to use a Buy Now, Pay Later payment option.

• Is the purchase necessary? It is always wise to consider the necessity of purchases, but with the appeal and convenience of BNPL payment options, impulse can easily triumph over necessity.


• Does the plan have interest? If BNPL loans seem too good to be true, it is because they often are. Not all programs offer the same conditions. Even though split payments provide convenience on the front end, you may pay up to 35% more on the back end. While some are interest-free, others charge interest or have flat-rate convenience charges embedded into the total, adding unnecessary costs to purchases that already require a short-term loan.


• How does the loan payment fit into your budget? Although most BNPL loans are typically short, lasting only six weeks, it is important to ensure that the convenience of these payment plans does not interfere with other financial responsibilities, such as savings contributions. It’s essential to evaluate your budget and determine the source of each payment. Will you be dining out less often or making your own coffee instead of visiting your favorite coffee shop?

What impact can using Buy Now, Pay Later have?

• They can change spending and saving habits. Using short-term finance options creates a false understanding of a purchase's financial impact. Over time, users can begin to look at purchases in increments instead of in full, which can encourage overspending.


• Like credit cards, BNPL programs offer consumers spending limits that usually far exceed their financial reality. The spending power offered to consumers through BNPL programs often overlooks their other financial responsibilities and typically does not consider factors like income or credit scores. For younger users still learning to manage their finances and budget effectively, the allure of short-term financing options can hinder their ability to save money and disrupt their overall budgeting efforts.

Being an informed consumer is crucial, and the Army’s Financial Readiness Program is designed to help Army Families achieve financial stability. Learn how to stay financially ready by visiting your local Financial Readiness Program.

By Kristen E. Murphy, Directorate of Prevention, Resilience and Readiness