What's the Best 'Buy Now, Pay Later' Service?

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  • There are dozens of BNPL services out there these days, and each has its own terms.
  • Most use the "Pay in 4" model, where you pay 25% upfront and pay the rest back in three installments over six weeks.
  • It's best to compare several BNPL services side by side before choosing one.

I read all the fine print so you don't have to.

The holiday season is nearly upon us and that means it's time to start shopping for gifts for friends, family, and maybe yourself, too. Paying for all those presents can get expensive, and many people turn to "Buy Now, Pay Later" (BNPL) services if they can't pay the full balance upfront.

But deciding which BNPL service to use can be almost as challenging as finding the perfect gift. We wanted to help clear up any confusion by comparing six of the top BNPL services side by side.

How do BNPL services work?

For those who are new to BNPL, these services are like a short-term, interest-free loan. You choose the BNPL service as your desired payment method upon checkout, and the BNPL provider will run a soft credit check. This determines whether the purchase is eligible and, if you opt for longer-term financing, what interest rate you'll pay. But it doesn't affect your credit score.

The most popular BNPL repayment method is the "Pay in 4" option. This is where you pay 25% of the purchase price when you check out. Then, you pay the remaining balance in three additional installments that are two weeks apart from each other via credit card or transfer from a bank account. So the full balance should be paid within six weeks of your initial purchase.

Most companies don't charge any interest on Pay in 4 plans, though they may charge late fees if you fail to keep up with your payments. Other companies will refuse to allow additional purchases if you fall behind on your outstanding installments.

In addition, some BNPL services offer monthly payment plans. These operate more like traditional loans with interest accruing over time. But they generally have short loan terms of 24 months or less.

How to choose the right BNPL service for you

Some retailers work with several BNPL services, but others may only have one company they partner with. In that case, you may not be able to choose which BNPL service you use. But if you have the choice, here are a few things to keep in mind when exploring your options:

  • Whether the service does a soft or hard credit check
  • Spending limits on purchases
  • Repayment terms, including interest charges and late fees
  • Whether the service offers a virtual card

Virtual cards enable you to use the BNPL service at retailers that may not partner directly with the service. For example, some companies may enable you to check out with Affirm directly from their website. But if you want to use a different BNPL service, you can do so by using a virtual card at checkout.

The 6 best "Buy Now, Pay Later" services

Here's a table showing how six of the most popular BNPL services -- Affirm, Afterpay, Klarna, PayPal Pay in 4, Sezzle, and Zip (formerly known as Quadpay) -- compare on the following factors:

Affirm Afterpay Klarna PayPal Pay in 4 Sezzle Zip
Credit Check? Soft Soft Soft Soft Soft Soft
Where It's Offered Amazon, Walmart, Target, and many others Nordstrom, Sephora, lululemon, and many others Nike, Instacart, Wish, and many others Target, Best Buy, The Home Depot, and any retailer that accepts PayPal Target, Bass Pro Shops, and many others Best Buy, Amazon, Walmart, and many others
Virtual Card Yes Yes Yes No Yes Yes
Purchase Limits $50 to $17,500, depending on credit and payment history Depends on credit, but starts at $600 Varies based on payment history and outstanding balance $30 to $10,000 Varies by merchant Varies based on repayment history and how long you've used Zip
Payment Schedule(s) Pay in 4, Monthly Pay in 4, Monthly (6- or 12-month terms) Pay in 4, Pay in 30, Pay Over Time Pay in 4, Monthly (6-, 12-, or 24-month terms) Pay in 4 Pay in 4
Amount Due at Purchase Pay in 4: 1/4 of the purchase price, Monthly: Varies Pay in 4: 1/4 of the purchase price, Monthly: Varies Pay in 4: 1/4 of the purchase price, Pay in 30: None, Pay Over Time: Varies Pay in 4: 1/4 of the purchase price, Monthly: Varies 1/4 of the purchase price 1/4 of the purchase price
Interest Rates Pay in 4: 0%, Monthly: 10%–36% Pay in 4: 0%, Monthly: Varies, depending on credit Pay in 4: 0%, Pay in 30: 0%, Monthly: Up to 28.99% Pay in 4: 0%, Monthly: 9.99% to 29.99% N/A $1 finance charge per installment ($4 per purchase)
Late Fees None Capped at 25% of the order value No more than $7 None None $7
Source: Company websites

Dig into the details of a few services before you decide which one you want to work with. Some offer bonus perks as well. For example, those who go with PayPal Pay in 4 also get PayPal's purchase protection on every purchase. And those who choose Klarna can rack up rewards points they can put toward future purchases.

There's no rule saying you can only use one BNPL service, either. But whichever you choose, make sure you keep track of your spending and spend only as much as you know you can pay back by the due date. Otherwise, the BNPL service could report you to a collections agency, which could damage your credit for years to come.

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