Buy Now, Pay Later: Definition, Dispute Resolution, and More

So buying from the comfort of your home is very convenient, but can you imagine being able to buy now and pay… later?

Well, you don’t need to imagine because it’s a reality now. Buy Now, Pay Later, or BNPL for short, is the new hot topic in finance, and it’s growing exponentially. 

Online shopping went through the roof during the 2019 pandemic, and so did BNPL. Since the start of 2020, making purchases through BNPL has increased by a whopping 230%.

This huge increase is not very surprising. According to The Next BNPL Horizon, 29 million US citizens, 11% of the entire population, have used BNPL between June 2020 and 2021.

As a consumer, there’s just a lot to learn if you want to spend your money safely. Check out how you can avoid disputes and how to resolve them on Amazon, Airbnb, AliExpress, Alibaba, and many more on ODR Guide.

What’s Buy Now, Pay Later?

Buy now, pay later is a fast-growing payment method where, as its name suggests, you can make a purchase immediately and spread out the payment in installments.

How you pay your debt depends on the plan offered by your BNPL service. Generally, BNPL requires a payment of at least 25% of the total price at checkout. The rest will be paid in installments.

Most BNPL services offer a variety of plans to choose from, but the most common is a four-installment plan paid bi-weekly or monthly.

But you might be wondering how BNPL is different from regular credit card loans. While the differences between the two are becoming less defined day by day, there are still a few you should know.

  1. Credit score:

Credit card loans appear in your credit score report and can either increase or decrease your score depending on your loan payment history. However, BNPL doesn’t always affect your credit score. That’s because not all BNPL services report to credit bureaus and their loans won’t appear on your credit report. If your BNPL service reports your late payments, your credit score will definitely be hurt.

  1. Interest:

Most Credit cards generally have high-interest rates that could go as high as 25%. In contrast, most BNPL services don’t charge an interest rate. Some, however, charge late payment fees.

  1. Payment Plans:

The last distinction between BNPL and credit card loans is how you pay them off. While both require a down payment, credit cards require you to pay the rest of your balance within a month. When you don’t pay your loan in full by its due date, interest will start accruing, and you’ll have to pay the rest on a monthly basis.

BNPL payment plans differ depending on the provider, but a four-installments plan is the most common. With more BNPL services, you have to pay the first quarter at checkout and then pay the remaining three quarters every two weeks. Some BNPL services offer monthly payment plans.

How Does Buy Now, Later Work?

When you’re ready to head over to the checkout page, you’ll probably find the option to Buy Now, Pay Later. If the store you’re shopping at supports your BNPL service, you’ll find it listed there.

When you’re ready to checkout using BNPL, you will fill out an application form in which you state your name, address, social security number, and others. Some BNPL services check your credit score before approving your BNPL request.

This check is generally a soft check that should not affect your credit score. However, some BNPL services might perform a hard check, which can affect your score.

In rare cases, your BNPL purchase might be rejected if your credit score is low.

While most BNPL providers support online shopping only, some offer both in-store and online checkout options.

To buy now, pay later in-store, you will use your BNPL app at checkout to spread out your payment.

Famous BNPL Services and Apps


Affirm is a major BNPL provider that provides a variety of payment plans, including interest-free quarterly payments every two weeks. Other plans offer monthly installments spread over 6 months at a minimum. These plans charge an interest rate (APR) that starts at 10%. Also, Affirm has no late fees.

Major retailers and stores in the clothing, accessories, beauty, auto, and electronics industries support Affirm. This includes Walmart, Target, Best Buy, Nike, Addidas, Nectar Sleep, and Reverb.


Afterpay is an international BNPL provider based in Sydney, Australia that’s free “for customers who pay on time”. This means that Afterpay users pay no interest on their loans. Better yet, Afterpay supports both online and in-store purchases.

However, Afterpay has late fees that can go as high as 25% of your total bill.

Thousands of retailers and stores accept Afterpay BNPL, including MAC Cosmetics, Finish Line, Urban Outfitters, Sugar and Jade, Crocs, and Ray-Ban.


Klarna helps you pay for your purchases in four installments, paid every two weeks, and interest-free.

When it comes to late fees, Klarna charges up to $7, or up to 25% of your purchase, as a late fee if you don’t pay within 10 days from the payment due date.

Should You Use BNPL?

Buy Now, Pay Later is certainly a convenient way to purchase whatever you need on time, even when you don’t have the needed amount. However, BNPL can lead to overspending. Because you won’t have to pay immediately, you might buy things that you don’t really need.

A Momentive study found that people who make less than $50k are more interested and likely to use BNPL. If you belong to this category, pick your BNPL provider carefully.

Depending on your shopping habits, credit score, and needs, you might prefer an interest-free provider over a no-late fee one or vice versa.

In any case, make sure to only use BNPL for necessary products and to pay your debt on time.

With the increasing popularity of BNPL, you might be tempted to jump on the bandwagon. But before you do that, it’s crucial to know what you’re getting into before you go ahead and start paying using BNPL. Sure enough, BNPL is changing the way we shop for good reasons, but let’s not overlook the few drawbacks they have.

7 Pros of BNPL

  1. Convenience and ease of use.
  2. In-store and offline support.
  3. Zero-interest rates on some BNPL services.
  4. No hard credit check.
  5. No effect on credit score.
  6. Eases financial pressure if used responsibly.
  7. Can help decrease reliance on credit cards.

7 Cons of BNPL

  1. Overspending.
  2. Late payment fees of up to 25% of your debt.
  3. No to little buyer protection.
  4. Interest rates might be higher than that of your credit card.
  5. No Control over the time of payment.
  6. Easy accumulation of late fees.
  7. Increase risk of disputes and back charge.

Disputing Payments with BNPL Services

Some BNPL services or apps provide some sort of protection for unsatisfactory payments of transactions. Let’s find out how you can dispute a payment on Affrim and Afterpay.

Affirm Payment Dispute Resolution

If you want to dispute an Affirm payment, you must first contact the merchant and try to resolve any dispute directly with them.

If resolving the dispute with the merchant fails, you should contact Affirm to open a dispute no later than 60 days from the purchase date. You can do so by logging into your account on a browser, selecting the loan you’re disputing, and opening a dispute. You will be required to upload evidence and answer some questions before you can submit it.

  • You and the merchant will have15 days to provide evidence.
  • Affirm will make a decision and notify you within 15 to 90 days depending on your payment method.

If their decision is in your favor you’ll be refunded the full amount of the purchase minus the interest you paid. If not, you will continue paying your loan as scheduled, and no late fees will incur.

Afterpay Payment Dispute Resolution

Like Affirm, Afterpay advises you to try and resolve any disputes with the merchant directly. If you and the merchant can’t reach an agreement, you must contact Afterpay at [email protected] to start an official complaint and provide all the documentation they request.

The complaint email must include the following: your name, pertinent account information, a brief description of the dispute, and your contact information.

If you don’t like Afterpay’s decision or it couldn’t resolve your dispute within 30 days, binding arbitration with the American Arbitration Association will follow. Learn more on the arbitration process on Afterpay’s US installment agreement.

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