Using Buy Now, Pay Later Plans

Many stores and online shops now offer the option to buy now and pay later — also called an “installment credit” or “pay over time” plan.

How buy now, pay later plans work

Here’s what to know if you choose this option at checkout to pay for an item:

• The plan might require a credit check, but some plans might offer no credit checks.
• You pay part of the cost now and get the item.
• The money goes to the company that manages the plan.
• That company pays the store in full.
• You make regular payments to the company that manages the plan. Usually, you pay with a credit or debit card over a few weeks or months until you pay off the purchase in full. You don’t pay the store.

Many buy now, pay later plans advertise no-interest payments and few or no fees — but most plans do charge some fees (sometimes high ones). For example, fees for each payment, for paying late, or for changing your payment date. Many plans emphasize that you don’t pay the full cost upfront — but you might have to pay the item off in a matter of weeks. And, depending on how you set up your payments, you could be charged other fees. For example, if you sign up for autopay with your debit card, you could get hit with overdraft fees if you don’t have enough money in your account when payments come out. If you use your credit card, make sure the payment won’t tip you over your credit limit.

The companies that manage these plans might report your payments to the three nationwide credit bureaus — Equifax, Experian, and TransUnion. That could hurt your credit if you miss a payment or pay late. On the flip side, making payments on time might help your credit.

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