BNPL companies typically make money via merchant fees rather than interest

What is buy now, pay later?

The buy now, pay later industry allows consumers to buy something immediately and pay in installments, typically without the need for applications or credit scores associated with credit cards. BNPL has boomed in the last decade, led by fintech companies Affirm, Klarna, and Afterpay, which have targeted young adults. Some critics say BNPL is a reinvented version of payday loans that allow borrowers easy access to cash with relatively few barriers.

Buy now, pay later loans typically split payments into 4 installments

While they're marketed as "interest-free" loans, BNPL loans often have penalties for late payments, such as late fees in varying amounts depending on the BNPL company used to make the purchase. BNPL users often pay 25% of the BNPL loan at checkout, and then pay the remaining balance in three more installments over the course of roughly six weeks, depending on the BNPL company and agreement.

BNPL's biggest risks include the ability to stack multiple loans simultaneously

Buy now, pay later loans come with some risks, such as the hefty late fees that can add up over time in the case of missed payments. However, personal finance experts say that tactics like reading the fine print can help consumers use these financial tools more safely.

Gap and Sephora now accept BNPL, despite paying up to 8% per sale

Despite these merchants paying roughly 2% to 8% of each sale's cost (more than they pay for most credit card processing fees), they're signing on, in part, because BNPL can help them improve their conversion rates at checkout.

BNPL may be adding a layer of debt that doesn't show up in economic data

Given somewhat limited regulation in the BNPL space, data about its usage is limited—many BNPL firms have resisted sharing information about user purchases, finances, and more thus far. As more people begin using buy now, pay later services, experts are concerned about whether BNPL is adding a new layer of "hidden leverage" to the economy.

Affirm's COO recently said that the company believes the credit card is 'going the way of the VHS tape'

Some people use buy now, pay later apps as an alternative to credit cards. BNPL services have a lower barrier to entry than credit cards—many frequent BNPL users have low credit scores.

Why consumers could soon see the impact of buy now, pay later loans on their FICO credit scores

FICO rolled out its first-ever BNPL-specific credit scoring models in June 2025. While missed installments can now negatively impact a credit score, there's also the potential for on-time BNPL installment payments to help boost scores.

BNPL has 19th-century roots, but the pandemic made it mainstream

The modern BNPL model didn't take off until the COVID-19 pandemic, when consumers were stuck at home and lockdowns forced them to shop online rather than in person. The number of US BNPL loans grew more than tenfold from 2019 (16.8 million) to 2021 (180 million), according to a Consumer Financial Protection Bureau report.

The story of Apple Pay Later, a short-lived BNPL service

Apple rolled out its own buy now, pay later service in 2023, but Apple shut it down the following year. Instead, Apple made changes to let its Apple Pay users make purchases and access installment loans through BNPL company Affirm.

Over 25% of Americans regret using BNPL due to unexpected costs

Almost 24% of buy now, pay later users have missed payments, with younger users (32% of 18- to 29-year-olds) being more likely to fall behind on payments than their older counterparts. (Only 12% of adults age 60 or over had done the same.)

Credit card companies make money through interest, annual fees, and more

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The story of Klarna's IPO

BNPY company Klarna went public on the NYSE in September 2025, roughly 20 years after it was founded. At the time, Klarna made roughly three-quarters of its revenue via merchant fees, charging a small premium for each purchase.

Some argue that advance payday apps aren't markedly different from payday loans

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'Buy one, get one free' is a clever way to get you to spend more money

One Burger King diner recently saw the price of her $2.16 sandwich rise to $3.19 per sandwich when she used a buy-one-get-one-free (or BOGO) coupon. Naturally, she became suspicious about how good a deal BOGO really is. This video explains why BOGO deals are a way for companies to get you to spend more money, rather than less.

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