BNPL – Buy Now/Pay Later Risks & Alternatives

Woman receiving a BNPL offer on her phone

Buy now, pay later (BNPL) programs can be enticing for people who are short on cash and ready to make a purchase. These programs are low- or no-interest installment payment plans that some retailers – often online merchants – may offer at the time of purchase. They are increasingly popular in the travel and leisure industry as well. BNPL plans may appear helpful for those who are nearing their credit card limits or don’t yet qualify for a credit card.

But BNPL can carry with it some serious risks, especially if you don’t read the terms and crunch the numbers in detail. Our friends at Ohio Credit Union League explore the benefits and the serious down sides of utilizing a BNPL program.



Experian, one of the nation’s leading credit reporting agencies, noted that from 2019–2021, the number of BNPL loans from popular providers increased by 970%. It makes sense; BPNL programs don’t require a credit check and allow consumers to pay for purchases over a period of time, which is more manageable for some budgets. It’s a tempting offer especially for those looking for alternatives to a credit card.



When you agree to a BNPL payment program, you will make equal installment payments on a set schedule over several months, like a personal loan. You will pay no interest if you pay the required amount in full and on time. Credit cards, by comparison, charge interest each month on any unpaid balance. According to LendingTree, the average credit card interest rate in America is (as of spring 2024), 24.61%, and at a five-year high point. Even if you carry only a small balance, the interest charges alone could take a big bite out of your monthly budget. This in particular makes BNPL programs attractive.

It’s easy to be approved for a BNPL. They may not require a credit check which is ideal for consumers without a credit history or those working to rebuild one. BNPL can be an option to help you pay for a purchase and avoid interest if you can be sure you’ll have the necessary funds within a short time. Before you sign a contract, though, read the fine print to understand all terms and possible penalties.



If you’ve struggled to make on-time credit card or loan payments in the past, a buy now, pay later program may not be the best option, even if it sounds like a good deal. Review the terms and know your grace period (the deadline by which you must make a payment before incurring a late fee). Many BNPL plans require multiple payments within the same month. Some may easily exceed the percentage you would pay per month with even a higher rate credit card.

BNPL’s can give you a false sense of affordability, encouraging you to spend more than your budget can manage. Some even charge a fee on top of the purchase price. This means you’ll pay more than you would have if you paid in full at the time of purchase.

Review the schedule for all your automatic payments and ensure you’ll have enough in your credit union account to cover the payment when it is deducted. If not, you could end up paying overdraft fees on top of it all. If you can’t make your payments on time, the BNPL provider could turn the account over to a collection agency, which puts your credit score at serious risk.



While they aren’t a perfect alternative, many credit cards offer cash-back rewards based on the dollars you charge. That’s free money you could use to pay your balance or increase your savings. BNPLs don’t offer rewards.

Another alternative is to explore a low-interest personal loan or low rate credit card from your local credit union. They can review your entire financial situation and help you map out the best plan for paying your bills and meeting your goals. The flexibility and personal connection you can expect with a credit union like FFCCU offers you a much safer way to cover major purchases.

Just call, text, or hop on live chat if you have any questions.