FINANCIAL WELLBEING HUB

Buy now
pay later

FINANCIAL WELLBEING

Buy Now Pay Later: the pros and cons

When money is tight, that “Buy Now, Pay Later” option at the checkout can be tempting. Platforms such as Klarna and PayPal Later have become a popular way of spreading the cost of online shopping, but they come with a few pitfalls that it’s good to be aware of.

Buy Now Pay Later (BNPL) schemes mean you can receive an item straightaway but pay for it in instalments. This gives you some financial flexibility if your budget is stretched. But as with any form of credit, there are a few risks, such as late fees, lower consumer protection and potential credit score impact. What’s more, the overspending these schemes encourage can lead to debt spiralling out of control. Here’s everything you need to know.

What is Buy Now Pay Later?

Buy Now Pay Later (BNPL) is a payment method that allows you to make a purchase without paying for it all upfront. Instead, you pay a proportion of the cost now and the rest over time – often in three instalments spread out over a few weeks or months. It’s most often used online, but you can use it in store with a digital wallet.

BNPL has risen in popularity during the cost-of-living crisis, with platforms such as Klarna, Clearpay and PayPal Later all offering this option to cash-strapped customers. However, it’s important to remember that it’s a form of credit, its official name being Deferred Payment Credit. The Financial Conduct Authority is bringing in new rules to help protect customers, but BNPL can still result in a build-up of debts if it’s not used responsibly.

How does Buy Now Pay Later work?

Here’s how the BNPL process works behind the scenes.
The terms of your repayment plan will vary from one provider to the next, so be sure to read the small print carefully. Payments are deducted automatically, so it’s worth setting yourself reminders so you can make sure there’s enough money in your account to cover them.

The benefits of BNPL

Like any payment method, BNPL has some obvious advantages. These include:
Interest-free payments:
Many providers won’t charge interest if you make payments on time, just like a credit card – though some may charge it for longer repayment terms.
Managing your cash flow:
Nobody likes the feeling of being put on the spot. The fear of being pressured into making important decisions quickly and making a mistake can be off-putting.
No credit check:

some providers don’t do a credit check, which is good news if you’re still building your credit score.

The pitfalls of BNPL

BNPL schemes offer a convenient way to spread the cost of buying something, but we’d recommend treating them with caution – especially when using it for multiple purchases. 

It’s all too easy to miscalculate or lose track of your monthly outgoings when you have instalments to pay of varying amounts and on different timescales. Research by Citizens Advice shows that around one in five BNPL users missed a repayment or made it late. One in ten of them were paid a visit by a bailiff as a result.

There are other issues, too:

Late fees and interest:
If you miss a payment, you may get charged late fees. These vary, but as an example, Clearpay charges up to 25% of the order cost if you’re late to pay. Alternatively, you may be charged interest on your outstanding balance, and this can soon add up.
Credit score impact:
many BNPL providers don’t report your payments to credit agencies, but if they do, a missed payment could harm your credit score.
Easy to overspend:
there’s a danger that BNPL can mean you end up living beyond your means, because you’re only looking at the cost of the instalments rather than the overall costs. It makes impulse buying more likely too, with studies showing that customers who use BNPL spend 6.42% more than those who don’t (young, low-income BNPL users typically spend more this way).
Less protection than other credit:
At the moment, there aren’t as many consumer protections in place for BNPL schemes as other forms of credit – though that should change with new regulations in 2026.
Refund delays:
Returns can be trickier with BNPL, as the refund goes to the provider before it comes to you, potentially leading to delays. Until the return is processed, you’ll still have to make your BNPL payments as planned or face late fees or interest.

Is BNPL a good idea or not?

BNPL is a handy way to spread the cost of everyday purchases if it’s something you really need.

It can be useful if you’re running low on budget for the month but know you’ll have more money coming in soon. However, they make it easier to end up overspending, and it can be hard to keep track of multiple payments.

To avoid late fees and interest, always read the small print carefully to make sure you know what you’re signing up for, including when payments will be taken. If you’re worried about debts spiralling out of your control, you’ll find details of debt charities you can turn to for support here. Finally, you should always prioritise your mortgage and other secured debt over unsecured debt from BNPL purchases.

ARTICLES & BLOGS

A little further reading

If you’d like to dig deeper, read our articles and blogs for the best Homeowner Loan content and insight.

A case study about Short Term Forbearance

I changed jobs and didn’t get paid for a few months.
Read more

A case study about Relationship Breakdown Support

I couldn’t afford the mortgage on my own after we broke up.
Read more

A case study about Proactive Support

I was paid late and didn’t want to fall behind on the mortgage.
Read more

A case study about Rate Change Savings

I wasn’t sure if I’d be able to afford higher mortgage payments after my deal ended.
Read more

A case study about Managing Financial Difficulty

I was juggling so many debts but getting nowhere.
Read more

A case study about Non-Profit Debt Advice Support

I was worried how I’d repay my debts after my marriage failed.
Read more
Trustpilot