What is Buy Now Pay Later?
You’ve probably seen offers at checkout that say things like “Buy now, pay later.” BNPL lets you split your purchase into a few easy payments—often with no extra interest if you pay on time.
BNPL is growing quickly because it’s easy to use and often doesn’t require a credit check.
While it can be convenient, BNPL is still a loan—and if you miss payments, it can lead to extra fees, damaged credit, and debt that’s hard to get out of.
How your debt can increase with BNPL
While BNPL may seem simple, there are risks to using it.
Here are ways that BNPL can hurt your budget:
- Overspending. Because the payments are small, it’s easy to buy more than you can afford. That’s what stores are betting on when they offer BNPL options.
- Balancing multiple BNPL loans at once can make it hard to keep track and makes it easier to miss a payment.
- Late or missed payments can lead to late fees, overdraft charges, and collections. See more below.
- Hidden fees. Some companies still don’t clearly show all fees upfront and these can add up.
PRO TIP: BNPL offers often appear right before you buy. Set a rule for yourself: don’t start a new BNPL until you’ve paid off your current one.
How BNPL impacts your credit
Most BNPL companies don’t report on-time payments, but missed payments sent to collections can stay on your credit report for up to seven years. This can make it much harder to get approved for credit cards, loans, or even an apartment down the line.
Pro tip: Some BNPL providers have started reporting all transactions to credit bureaus, which can help build credit, but this is still not common.
What happens if you miss a payment?
If you pay on-time, you typically are not charged any interest. But if you miss a payment, big fees and interest can kick in.
Here’s what to expect:
- Account freeze: They may freeze your account, so you can’t keep shopping
- Late fees: You may be hit with late fees from the BNPL company
- Overdraft charges: You may be hit with overdraft charges from your bank
- Interest: You may be charged interest on the amount you owe
Keep in mind: Even though it doesn’t feel like one, BNPL is a type of loan. Illinois law does not allow lenders to charge more than 36% APR on loans (that includes any fees).
What you can do if you are falling behind on payments
Before collections
Contact your BNPL company right away.
Ask about:
- Hardship programs,
- Payment extensions, or
- Adjusting the due date.
PRO TIP: Calling can feel stressful, but don’t let embarrassment stop you. Practice what you’ll say, and remember—asking for help early can save you money.
If the debt has been sent to collections
- You don’t have to take every call, but you can use their call as a way to get more information about the debt.
- Ask for written verification of the debt. If possible do this within 30 days of first hearing from the debt collector.
- If you can afford to pay a percentage of the debt, even 30%, you could try to negotiate a settlement.
- If you can’t pay, you can tell the collector that you have no extra money. Learn more about what creditors can take from you.
Your protections with BNPL
Interest rate cap
In Illinois, BNPL loans can’t exceed 36% APR under the Predatory Loan Prevention Act. Loans above this rate may be void and unenforceable.
Clear terms
Under the Truth in Lending Act, BNPL companies must give you:
- Clear loan terms
- Your payment schedule
- All fees
- Regular billing statements showing your amounts due and upcoming payments
Advance notice of payment due dates
You must get a statement at least 14 days before a payment is due. No late fees or negative credit reports can be made without this notice.
Purchase and billing protections
You can dispute charges for defective, missing, or incorrect items directly with the BNPL company. The company must investigate and can’t require payment during the review.
Billing errors (like double charges) must be reported within 60 days.
Fraud protection
If someone uses your BNPL account without permission, your liability is capped at $50 or less—and most companies waive even that.