More and more companies that sell items online are offering you a unique way to pay.
Instead of paying with your debit card or credit card, you can choose services like Klarna, Affirm or Afterpay. These are "Buy Now, Pay Later" (BNPL) services that let you pay for your purchase in installments.
How does BNPL work?
BNPL services break up your purchase into several equal payments (usually two, four or six). The first payment is due immediately, and the other payments hit your bank account, debit card or credit card on a pre-set schedule. For example, if you're buying a $200 item, you may have to pay $50 immediately and then $50 every month for three months.
Usually, you do not pay interest on these services unless your BNPL plan is longer than just a few payments, but there might be an application fee or service fee. There may be additional fees if you miss a payment or need to reschedule a payment.
To use BNPL, you'll need to fill out a short "application" form when you check out for your online purchase, providing information like your name, address, birthday and possibly your Social Security Number. Until recently, BNPL services only did a "soft check" on your credit score, so your credit score was not affected by applying — but it will be affected if you miss a payment! In addition, Nerdwallet reported, "In June 2025, the credit score company FICO announced it would start incorporating BNPL loan data into credit scores." FICO has not yet announced how it will do that.
What you Need to Know
No matter what it's called, any "Buy Now, Pay Later" service is a loan! You are buying something and promising to pay for it in the future. That means that if you choose to use a BNPL service, it's super important that you keep up with your payments, in full and on time.
A few other tips:
- Make sure that you aren't being charged any interest and understand the consequences of not making your payments on time.
- Be sure that you can afford the payments when they are due. It's easy to forget about these small payments, and they can add up quickly!
- If you're struggling to pay your bills and you don't have an emergency fund, reconsider whether you really *need* that item you're about to buy.
CommonWealth One is here for you with a variety of services that can help you avoid possible BNPL traps. We offer a wide variety of financial education and counseling services, including helping you create and stick to a budget, build up your emergency fund and even improve your credit score! Request a free consultation with one of our Certified Financial Counselors to get started today.
And mark your calendars for a free webinar — Pay Later, Plan Smarter: A Guide to Buy Now, Pay Later. Our partners at GreenPath will explore the benefits and risks of BNPL and share practical strategies to use this tool in a financially healthy way.
We look forward to seeing you or talking to you soon!
