DEFINITION
Buy Now Pay Later (BNPL)
Buy Now Pay Later or BNPL is a payment option that allows consumers to make purchases immediately and then provide payments at a later date. The payment is often split into multiple smaller interest-free installments spread over a given time period. BNPL is often an option when online shopping and it serves to provide more flexibility and bigger buying power to the consumer.
Synonyms
Deferred payment plan
Acronyms
BNPL
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Synonyms
Deferred payment plan, flexible payment option, split payment plan
Acronyms
BNPL
Examples
A person wants to buy a new TV that costs $1000 USD. However, they do not want to pay such a large sum upfront. They therefore choose the BNPL option instead, agreeing to pay $200 USD every two weeks for the next 10 weeks. The BNPL provider pays the retailer in full in the consumer’s stead and is then paid off during those 10 weeks. Typically, there will be no additional cost, provided the payments are made on time.
FAQ
How is BNPL different from credit cards?
BNPL is generally more convenient and approachable than a credit card when it comes to smaller payments. This is because BNPL generally doesn’t charge interest and doesn’t require a formal credit card application to be approved, making it more accessible to users with limited credit history. However, BNPL is also more limited in terms of the size of funds that can be acquired.
What are the risks of BNPL?
Due to its convenience, users are more likely to overspend if they frequently use BNPL options. Furthermore, late payments can incur fines and even impact one’s credit score.
What are the benefits of BNPL?
Buy now, pay later options allow consumers more financial flexibility due to them typically not having any additional costs. This in turn is beneficial for the retailer as people are more likely to make bigger purchases.
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