Buy Now, Pay Later (BNPL) is a short-term financing option that allows you to purchase an item now and pay it off over time, usually in four equal installments. Popular BNPL providers are Afterpay, Klarna, Affirm, and PayPal Pay in 4.
It’s often marketed as a simpler, safer alternative to credit cards because it often comes with no interest (if paid on time), no hard credit check, and instant approval at checkout. But this option is still a loan, and it comes with risks.
It's convenient. It's available directly at checkout, online, and even sometimes in-store.
It's interest-free when paid on time. Many services don't charge interest if you make payments as scheduled.
No hard credit check. Most approvals for BNPL don't affect your credit score.
Overspending. Breaking purchases into small payments can make them feel more affordable than they really are. It’s also easy to forget you’re still paying off past purchases when new ones come along. This can stack multiple BNPL loans at once, creating a cycle of overspending.
Late fees. While BNPL may seem “interest-free,” that only applies if you pay on time. Missed payments often come with late fees that stack on top of what you already owe. Even a few missed payments can wipe out any savings you thought you were getting, turning a “no-interest” plan into an expensive purchase.
Impact to Your Credit Score. Many people assume these services don't affect credit, but some providers do report activity to credit bureaus. On-time payments may not always help your score, but late or missed ones can hurt it. The danger here is thinking BNPL is “risk-free,” when in reality, one slip could damage your credit history.
Tip from Red Canoe: If your goal is to build or improve your credit, BNPL isn’t the best tool to do that. Instead, consider safe options like our Credit Builder Program or one of our Red Canoe VISA cards. Both are designed to help you establish positive credit history while giving you more control and protection over your borrowing.
Multiple Loans. BNPL is rapidly gaining popularity and is available at nearly every checkout. That can make it easy to say “yes” without realizing how many payments you’ve already committed to. Having several loans due at different times can feel like juggling bills, making it more likely to miss one. This “stacking effect” is a common way people end up in financial stress without even noticing it at first.
| Feature | Buy Now, Pay Later | Credit Cards |
| Interest | 0% if paid on time | Varies, often higher |
| Credit Check | Usually soft or none | Hard inquiry required |
| Builds Credit | Not always | Yes, if used responsibly |
| Rewards | None | Often includes cashback/points |
| Late Fees | Yes | Yes |
If you decide to use a Buy Now, Pay Later service here are a few ways to help protect your budget and avoid falling into debt.
Budget First. Take a look at your monthly spending before you decide to pay in multiple payments. Will you be able to cover other bills and essentials like gas and groceries once these payments are added? The payments for your purchase may feel small, but once you start combining them with other bills, they can create more stress than you may have initially anticipated.
Use sparingly. Buy Now, Pay Later services shouldn't be your go-to way of shopping. Saving up for purchases is always the safest way to spend since it avoids debt and payments all together. If you do use BNPL, use it for necessary purchases instead of impulse buys.
Track due dates. It's easy to forget when payments are due, especially if you have multiple BNPL payments coming out of your account at different times. Set a reminder or use your Online Banking app to keep track of the payments and any other upcoming payments that will hit your account. Missing even one payment can result in fees or hurt your credit.
Read the fine print. Not all of these BNPL services are the same, so it's important o know what you're getting into. Some of them report to credit bureaus, some have late fees, and policies for returns can be confusing. Take a few minutes to review the terms and conditions before you click "Buy Now."
Buy Now, Pay Later can be useful for spreading out payments on big purchases, but it's important to use it wisely. Before choosing one of these services at checkout, think to yourself: Can I afford this without financing it? If the answer is no, waiting or saving might be the smarter option. Red Canoe even offers a Savings Goals feature within Online Banking that can help you reach your savings goals faster by tracking your progress.
At Red Canoe Credit Union, we're here to help you build healthy money habits and financially thrive every step of the way.