Buy Now and Pay Later


One of the most popular alternative payment methods is also one of the most ancient: purchase now, pay later (BNPL)


What Is a ” Buy Now Pay Later” Transaction?


1st  BNPL improves sales by encouraging consumers to spend more because they know they can pay in installments. It’s an excellent option for consumers seeking a flexible payment method without incurring credit card interest.


When a merchant uses a BNPL service, the merchant receives payment quickly. After that, it is up to the provider to collect installment payments from the customer. For the merchant, this means they can accept payment terms from clients without incurring additional financial risk.


As a business owner, this is a requirement in the modern era.


It’s ideal if you have a well-designed website for your business and store that the eDataPay technical team can integrate with ease.


Affirm, Klarna, and AfterPay are just a few of the services that enable shoppers to use the BNPL option at a wide variety of e-commerce stores. The need for BNPL services is increasing.


The merchant receives full payment from the provider after the plan is approved and created.


Buy Now, Pay Later (BNPL) is a sort of short-term financing that enables consumers to buy purchases now and pay them off later, frequently interest-free. Also known as “point of sale installment loans,” BNPL arrangements are becoming an increasingly common method of payment, particularly for internet purchases.


How Are BNPL’s Services Provided? Third-party BNPL providers provide an additional payment option throughout the checkout process. When the checkout process is complete, the BNPL provider makes a full payment to the merchant. Following that, the customer repays the provider in a series of installments.


While consumers may find BNPL financing convenient, there are some potential drawbacks to consider.

Additionally, BNPL can help decrease shopping cart abandonment due to sticker shock.

Merchants often pay the BNPL provider between 2% and 8% of the purchase price, plus a minor per-transaction fee in some situations.




  • Buy now, pay later financing is a type of point-of-sale installment loan that enables consumers to make purchases and pay for them later.


  • Typically, consumers make a down payment on the purchase and then repay the remaining in a predetermined number of installments.


  • Oftentimes, buy now, pay later options do not carry interest and are easier to obtain than typical credit cards or lines of credit.


  • Generally, BNPL has no effect on your credit score; but, late payments or nonpayment can negatively impact your credit score.


Numerous companies, like Klarna and Affirm, offer Buy-now-pay-later financing on purchases made at participating merchants. PayPal has launched its own installment financing product at the point of sale. 123


Several credit card companies, including Chase and American Express, have also established comparable financing programs.


Buy now and pay later financing provided by a credit card issuer may have cheaper fees or interest rates than the variable annual percentage rate paid on outstanding amounts.


Purchase with the “Buy Now Pay Later “


Buy now and pay later not all programs are same. Each business has its own set of terms and restrictions, but in general, point of sale installment loans work as follows:


  • You make a purchase from a participating retailer and select the buy now, pay later option during the checkout process.


  • If authorized (which happens in a matter of seconds), you submit a small down payment, such as 25% of the total purchase price.


  • You then repay the remaining balance in interest-free installments.


  • You can pay with a check or a bank transfer; you can even have payments automatically debited from your debit card, bank account, or credit card.




You’ll have an option during checkout to break up your total purchase and pay a smaller sum now rather than the full balance.


If you’re interested, you’ll complete a brief application on the checkout screen. It may request information such as your name, address, birth date, and phone number. Additionally, you will give a payment method. The BNPL provider may then do a soft credit check, which will have no effect on your credit score, and quickly accept or decline your application.




While both entail delayed payments, BNPL is distinct from making a credit card purchase. When you pay for items with a credit card, you are simply obligated to make the minimum monthly payment due on the card. Interest continues to collect on the remaining balance (unless you used a card with a 0% introductory APR) until the balance is paid in full. However, you can maintain a balance indefinitely.


In comparison, BNPL arrangements frequently do not include any interest or fees. However, they are subject to a predetermined payback schedule—generally many weeks or months. You are informed in advance of the amount you will be required to pay each time, and it is typically the same. It operates similarly to any other unsecured personal or consumer loan.


Purchases that are not eligible for buy now, pay later financing may be excluded. Additionally, there may be limitations on the amount that can be financed in this manner. However, buy now, pay later can be an attractive option to pay for smaller online purchases, and its popularity increased in 2020, along with the growth of e-commerce in general.


Credit Reports


The majority of buy now, pay later organizations demand simply a light credit check, which has no effect on your credit score. Others, on the other hand, may conduct a strong pull on your credit, momentarily lowering your score. 6


Certain purchase now, pay later loans are reported to one or more of the three major credit reporting agencies. If a financial institution transmits this information, the loan may appear on your credit reports, which may have a negative effect on your credit score.

According to The Strawhecker Group’s early 2021 survey, 39% of Americans have tried BNPL at least once.



Six of the Best Purchase Now, Pay Later Apps for Merchants


  • Klarna: The best all-around purchase-now-pay-later app


  • Affirm: This is the best option for retailers who offer high-ticket items.


  • PayPal Later: This option is optimal for PayPal customers and solopreneurs.


  • Afterpay: Ideal for younger customers on a tighter budget or those still learning good purchasing habits


  • Zip (previously Quadpay): This payment method is suitable for brick-and-mortar stores and internet transactions.


  • Splitit: The most effective solution for worldwide online and in-person sales




Afterpay is one of the major BNPL sites, and it utilizes the simple Pay in Four approach. It collaborates with Old Navy, Gap, and Bed Bath & Beyond. Afterpay charges no additional costs as long as payments are made on time. However, if your payment is not received within ten days of the due date, a maximum fee of $8 will be assessed.


Affirm works with a variety of businesses, including Walmart, Adidas, and Pottery Barn. In comparison to other suppliers, its interest rates vary by retailer, which means that your payback term and interest rate will vary depending on where you purchase. While some of Affirm’s partner stores do not charge interest, others do, with durations up to 12 months. Affirm never charges a fee for late payments.


Klarna is available at Sephora, Foot Locker, and Macy’s. Its Pay in 4 plan similarly does not charge interest, but if Klarna is unable to collect a payment after two attempts, a late fee of up to $7 would be assessed.


Zip, formerly known as Quadpay, is accepted wherever Visa is accepted while using the Zip mobile app. It charges a $1 convenience fee per payment if you choose the pay-in-four option, and a $5, $7, or $10 late fee if you miss a payment, depending on your state of residence.


PayPal accepts payments in four installments online and through its mobile app at retailers such as Best Buy, Target, and Bed Bath & Beyond. There are no interest or late fees associated with the plan.


Sezzle, which is available at thousands of merchants including Target, charges no interest on purchases made under its pay-in-four plan. While Sezzle does not impose late fees, it will deactivate your account if you miss a payment, and you will be required to pay a $10 reactivation fee in order to access Sezzle again.



Particular Considerations


There are several points to consider prior to getting into a BNPL arrangement.

To begin, it’s critical to comprehend the repayment terms to which you’ve agreed. Again, these may vary per buy now, pay later company. For instance, some organizations may demand you to make biweekly payments on the outstanding debt for a month. Others may allow you three, six, or even twelve months to repay goods. Additionally, your interest rate, if any, may vary based on the loan terms.

Additionally, you must understand how your payments will function in order to plan for them in your budget. This assures that you can not only afford but also make your payments on time. Failure to make a payment under a buy now, pay later arrangement may result in late fees. Additionally, your late payment history may be reported to credit bureaus, lowering your credit score

The proportion of consumers who report that they spend more while utilizing Buy now, pay later than they would with alternative payment methods.

Additionally, keep in mind that while you may qualify for a 0% APR point of sale installment loan, approval is not assured. Buy now, pay later platforms can levy interest rates that are comparable to or greater than those charged by credit cards. Additionally, unlike with a credit card, you do not receive rewards on purchases made through buy now, pay later agreements.

Finally, examine return policies and how purchasing something now and paying later may affect your ability to return it. While the merchant may enable you to return the goods, you will not be allowed to terminate the buy now, pay later arrangement until you produce documentation of the return’s acceptance and processing.


The Advantages and Disadvantages of Buy Now, Pay Later


Buy now and pay later Consumer finance agreements enable consumers to pay for goods and services over time without incurring interest costs. And you can qualify for this sort of financing even if you’ve been turned down for other loans due to a low credit score. BNPL loans do not contribute to your credit card debt; nevertheless, they do contribute to your personal loan debt. They typically have no effect on your credit score, owing to the fact that they are frequently too brief to be recorded to the credit bureaus at all. 8


On the downside, obtaining them and paying them off does not assist you in establishing and maintaining good credit (as more conventional financing methods do). Additionally, you forfeit any benefits offered by credit cards, such as cash back or reward points.


And returning an item purchased through BNPL can be complicated. Naturally, you should receive your money back—but there may be a delay while the merchant notifies the BNPL lender of the refund. You may be required to continue making payments in the interim. If you do not, the payment may be listed as late or absent, incurring fines and eventually dinging your credit score. 9




  • A simple, disciplined method of paying for products over time
  • Frequently have a 0% or lower interest rate than credit cards
  • It is not necessary to have excellent credit or a high credit score to qualify.
  • Rapid approval




  • Payments can be difficult to keep track of.
  • Failure to make timely payments results in late penalties and a lowered credit score.
  • No points or cash back on purchases
  • Payments may continue regardless of whether the item is returned.


The Verdict

What Is a Buy Now, Pay Later Transaction

Buy now and pay later divides your whole purchase into equal installments, the first of which is due at checkout.

The concept behind buy now, pay later is to allow consumers to obtain items they require immediately—while simultaneously gaining some additional time to pay for them.

While the costs charged to merchants for buy now pay later services may appear high, these services can attract customers and stimulate purchases that would not have been made otherwise, especially when the installment plans offered do not impose interest.

Buy now and pay later financing may appear enticing if you are unable or unwilling to pay for something in full.

These loans increase your credit limit—without imposing high interest rates—but with a repayment schedule that prevents you from falling into a mound of continuous debt. However, examine the affordability of the payments and the penalties that may apply if you are unable to pay. Read the tiny print carefully when it comes to purchase now, pay later finance to ensure that you completely comprehend the terms of the agreement.


As a businessperson, while merchants do not face a direct risk of chargebacks when purchases are made through a BNPL service, retailers may observe a higher rate of returned sales for refunds. Certain clients may be more prone to make impulse purchases because they will not be required to pay anything immediately. Then, when the first installment is due, they may discover they’ve made a purchase they can’t afford and request a refund.


Currently, merchants are relatively immune to the hazards connected with BNPL and stand to benefit significantly from increasing their client base and selling more high-ticket items via BNPL sales.


To increase conversions and sales, some retailers offer multiple BNPL payment methods during the checkout process. If you’re forced to choose between two or more programs, it’s usually advisable to go with the zero-interest option, as it’s the cheapest. However, ensure that you can afford to pay the installments on schedule.


Finally, compare the advantages of point of sale installment loans to the advantages of alternative financing choices such as rewards credit cards or personal loans.




Payments for any business

From ecommerce stores, to subscription businesses, to platforms, SAAS and Marketplaces,

eData offer a complete stack for all your payments needs across channels.

To get approved for a merchant account in 24 hours

Apply here or call +1-561-395-9554.

Get In Touch with eDataPay Banking Specialist:


US Mailings Address:

20423 State Road 7, Suite F6-524, Boca Raton, Florida, 33498 USA.