The Instant Gratification of Buy Now Pay Later

In 2012 a small company called Affirm began offering consumers instant gratification with buy now pay later shopping, a form of digital layaway. Only with Affirm, your purchase was shipped right away with payments broken down into four, six, or even up to 12 small amounts. 

In 2020 while the world wound down to a slow roll due to COVID-19 the use of buy now pay later (BNPL) apps exploded in popularity. Affirm, recently acquired by Block, reports; “8.7 million Americans are using its buy now, pay later services, more than double from a year ago. The company signed up 1.6 million new customers in the U.S. and Canada just in the last 90 days.”

There are now several more buy now pay later apps that have joined an increasingly crowded market vying for consumers’ attention and forcing credit card companies to take notice. 

How Buy Now Pay Later Works

Back in the day, large retailers like Sears, K-mart, and Walmart just to name a few, offered consumers layaway plans. 

You made a down payment, then returned to the store to make more payments until you paid off the item, which would be hauled out of layaway storage for you to take home. This was especially popular with people who did not have a credit card and, let’s be honest, probably lived paycheck to paycheck.  

Buy now pay later apps offer consumers the instant gratification of getting their item immediately and paying for it in installments. If you make all your payments on time there are usually no interest fees, unlike putting the entire purchase amount on a credit card and fees begin to accrue immediately. 

Most layaway plans were designed for big ticket items like appliances or furniture but now even a purchase as low as $20 can be broken up into three or four interest free payments with a BNPL app. 

Who Loves BNPL?

Buy now pay later apps have become hugely popular with young consumers like Gen Zers and millennials. That’s not to say their parents and grandparents are not using it too, though. 

The beauty of the BNPL app is, most people with a smartphone will qualify for one and some companies do not even bother with a credit check. This helps consumers who are unable to qualify for a traditional credit card or simply do not want to use one be able to make purchases with payments spread out over time that are not accruing interest fees.

For  many a BNPL plan does not feel like using credit since there is a clear repayment plan established to keep the consumer on track to pay off the item they purchased. 

Retailers have embraced BNPL plans because the service fees are typically low and it converts more shoppers to buyers. 

Installment payments allow the retailer to “convert a [consumer’s] wish into a sale. It eliminates the ‘ ability-to-pay roadblock.’ For those using debit cards, the potential for an extended interest-free payment schedule through a BNPL is enticing, ultimately enticing enough to drive conversion, which is the primary goal of all digital commerce sites,” according to Chris Ventry, vice president at global consultant group SSA & Co.  

What Are The Best BNPL Apps?

Since Affirm there have been several more buy now pay later apps created to meet consumer demand. Investopedia offers their top picks. 


This app takes the top spot with a credit allowance of up to $17,500 with interest free payments spread out into three, six or 12 payments. You can make purchases in-store or online and choose the payment plan that works best for you. You can even use Affirm to make purchases with retailers who are not part of it’s network. The company will generate a one-time use credit card number through their app or online.

The downside to Affirm is some transactions do get charged interest (typically the largest ones), there is a credit check and they do not offer a physical credit card.


This BNPL app makes the best list because of its flexibility.  Like most buy now pay later plans it requires a 25% of purchase price payment right away but does allow users to reschedule subsequent payments up to two weeks later. You can reschedule payments for free once but after that it will cost you $5.  Make sure to reschedule all payments though or it will only apply to the next one due. There are no interest charges as long as you make payments on time. 


Investopedia chose this BNPL app because it does have tighter credit limits to help people from overextending themselves. Afterpay offers a credit card and will send you reminders when a payment is due. The downside to this app is you could be rejected if your credit is not up to snuff, some purchases may not qualify and late fees can run you as high as 25%. That’s a lot. 


If now is not the best time for a personal credit check, Splitit is the BNPL app for you. You can just use your existing credit card spending limits, which means you do have to have a credit card. American Express and Discover cards don’t count, though. There are no late fees but payments are charged to your credit card. So, you still could accrue credit card interest fees. Even though you are technically still using your credit card, on time payments to Splitit do not go towards building  a good credit history.


This app does not do a credit check and sets spending limits based on your verified income. You have lots of payment options, four, eight, 12 or 18 payments. The downside to PerPay is purchases are limited to their small marketplace, your item does not ship until you make your first payment (good-bye instant gratification) and all payments have to be made through payroll direct deposit. 


A highly recognizable and trusted financial brand, PayPal is accepted by millions of online retailers.  However, its BNPL services are not available in all 50 states and the purchase limit is $1500. You do need a PayPal account in good standing and all BNPL purchases have to be approved. So, there is the possibility of feeling the sting of rejection for some items. Acceptance or rejection is immediate, though, using the Pay-in-4 option at check-out. PayPal’s BNPL option is really only best for small purchases. 


This Swedish based company has been around since 2005 but was only available in Europe. It has since expanded to the U.S. reporting 90 million users and around 250,000 merchants in their network. They began offering a four payment plan that generates a virtual credit card (so you can use it at retailers who do not accept Klarna payments) with the first payment due immediately and the next three every two weeks. They do offer longer-term financing plans up to 36 months but you will have to pay interest. Unlike many BNPL apps Klarna offers a loyalty points program. Like PayPal and AfterPay, everything you want to buy with it has to be approved by Klarna first. 

Credit Card Companies Scramble to Keep Up

It is estimated that a whopping 45% of consumers will use some kind of BNPL plan in 2021 according to eMarketer in an article from This kind of use is getting the attention of major credit card companies who are now rushing to offer their own buy now pay later options. 

Individual retailers like Best Buy have offered BNPL plans in the form of a credit card that can be used to finance a purchase in-store or online interest free for usually up to a year. However, there is no structured repayment plan other than the monthly minimum due each week. That amount is usually too small to actually pay off the item per the terms of the agreement (six or 12 months usually) resulting in getting whacked with the full amount of interest being tacked on based on the original purchase amount no matter how  much of it you have paid off. Ouch. 

That’s changing. Macy’s, Bloomingdale’s and Bluemercury partnered with Klarna and reported, “higher spend per visit and increased acquisition of new younger customers, 45% are under 40.

Visa, MasterCard and American Express are all developing BNPL programs to keep up with consumer demand. The exception is Capital One. That company took a defensive approach and is blocking customers from using their cards to pay off BNPL purchases because, “the practice is risky for customers and the banks that serve them,’" according to a Reuters report. 

More Is Better…Right?

The growing market of buy now pay later options is only going to get more crowded as retailers explore offering their own in-house plans to avoid fees to Affirm or Sezzle and other third parties. With banks scrambling to create their own BNPL offers and a rumor that Apple is also jumping on the bandwagon consumers can expect to have more ways to pay for their purchases in the not-so-distant future. 

Sounds Good! Sign Me Up

While buy now pay later programs do have a lot of advantages there are still some big potential downfalls to using one. Without a credit check keeping them in check before they start spending, a lot of consumers could find themselves in over their heads with new debt growing by the minute with high-interest fees when they don’t make all their payments in full on time. 

In an NPR interview, The Washington Post's personal finance columnist, Michelle Singletary, offered some things to consider before you download a BNPL app to your phone.

“...this is something that doesn't build your credit over time 'cause I remember when I was getting my first credit card, Michelle, my mom would tell me, well, if you do well with this, you know, your credit gets better over time. So buy-now, pay-later doesn't sound like that at least is part of the option.”

“ If you miss one of those payments, they may report it to the credit bureau. So there's no upside to having it, but there is a downside if you don't make those payments. And lots of people don't end up making those regular payments.”

If you do sign up for a BNPL like  Affirm or Splitit heed those payment reminders and make them promptly in full each month. Once you miss a payment all the advantages of a buy now pay later program are lost because the interest will be high (as high or higher than a typical credit card) and you could get a ding on your credit report for the missed or late payment. 

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