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6 min read

How Does Buy Now Pay Later Work?

Buy Now, Pay Later (BNPL) is becoming more and more popular; and we can see why. Buying something and not having to pay straight away – sounds great, right? We have a look at the ins and outs of Buy Now, Pay Later and whether it really is a good idea!

A couple with shopping bags and a BNPL deal.

What is Buy Now, Pay Later?

Desperate for that new pair of trainers but payday isn’t for another two weeks? That’s not an issue when you can Buy Now and Pay Later. BNPL companies offer payment schemes that allow you to buy something straight away and pay for the item either through instalments or at a later date – usually 30 days.

But how does Buy Now, Pay Later work?

Let’s break it down, when you choose a BNPL payment scheme, the provider pays for the items you’re purchasing and then you pay them back. Normally this is over a short period, 30 days for the whole sum or 6 weeks for instalments but every Buy Now, Pay Later company is different and has its own rules so check the small print before signing up to anything.

Can I use BNPL anywhere?

In short, no. But it’s becoming more and more widely available. Global Banking Finance reported that there was a 39% year-on-year increase in BNPL payments in the UK in 2019, and they expect that to double by 2023. Figures like this mean that BNPL could be an option with most retailers shortly. It’s already offered by major brands such as ASOS, Pandora, M.A.C, Wayfair, Shein, and many, many more. Although it’s important to understand that these big companies aren’t offering the BNPL scheme themselves, it’s all through third parties.

So, who are these third parties?

The major four, as it stands, are PayPal, Clearpay, Laybuy, and Klarna – but there are more and more BNPL companies hitting the market. To use BNPL, you’ll need to check whether the retailer you want to purchase from is linked to one of these third-party companies and then set up an account with them. So, you’ll need to run through a couple of hoops to get access to this payment option.

Does Buy Now Pay Later affect your credit score?

A man worried about his credit score after missing payments.

A BNPL payment plan can negatively affect your credit score if you miss or make late payments. If you’re making all the correct payments on time, then this is usually not an issue. It’s also worth noting that to sign up to a BNPL company, they won’t usually conduct a hard credit check. However, if you’re struggling with debts, it’s probably not a good idea to take on more debt even in the form of BNPL. Remember, BNPL still counts as a loan.

Worried? If you’re worried about your credit score, see our page with budgeting tricks on suggestions to improve your credit rating.

Is Buy Now Pay Later a good idea?

The growth in BNPL has been fast and it might be so popular because it doesn’t feel like a loan. It’s quickly accessible, available to most people, even if you have bad credit, and they offer interest-free payments. But be cautious! All these perks can come with a catch.

The payments only remain interest-free if you make the full payments on time, otherwise, companies may charge you for the missed payments and it could have other serious consequences. Before October 2021 BNPL companies were unregulated, however, they’ve since announced that they will come under regulation by the Financial Conduct Authority (FCA). And while this is good news, we don’t yet know what the impact the BNPL companies have had on consumers and what the future holds.

Also, offering up this service to almost anyone might appear good for the consumer but that may not be the case. If you have bad credit or are suffering from serious debts, taking out more debt even in the form of a BNPL scheme is probably not a good idea. You must ask yourself whether you really can afford it. Overspending through a Buy Now, Pay Later scheme can be just as damaging as taking out a credit card or personal loan.

Advantages and disadvantages of BNPL

Here’s a breakdown of some of the advantages and disadvantages of Buy Now, Pay Later schemes:


  • They won’t usually carry out a hard credit check
  • Interest-free if payments are met in full and on time
  • Allows you to make purchases now and spread the cost of this
  • Online sign up


  • Can negatively affect credit rating
  • Interest charges may be applied if payments are late or missed
  • BNPL is a relatively new service, so it’s not tried and tested
  • Could get you into debt (or further debt)

Further reading