Should I use buy now, pay later?
Paid on time, 3 plans for $1,800 cost $1,934 in total. $134 of that is interest, on the 12-month plan at 20.00% APR (21.94% APY). The busiest two weeks ask for $261.
Example: $400 and $200 paid in 4, plus $1,200 over 12 months at 20% APR.
Use your own numbersAPR vs. APY: why the same rate has two numbers
APR (definition, opens in a new tab) (annual percentage rate) is the yearly rate before compounding (definition, opens in a new tab).APY (definition, opens in a new tab) (annual percentage yield) is what you actually pay or earn in a year once interest (definition, opens in a new tab) starts charging, or earning, interest of its own.
Lenders quote APR because it's the smaller number. Banks quote savings in APY because it's the bigger one. A 9.00% APR car loan charged monthly costs 9.38% a year. A 24.00% APR card charged daily costs 27.11%. A 5.00% APY savings account is a 4.89% APR.
To compare any two rates fairly, put them in the same unit. "Show rates as" switches every rate on the page; the results don't change, because the rate underneath doesn't.
| Kind of rate | Quoted as | How it's applied |
|---|---|---|
| Car, mortgage and personal loans | APR | APR ÷ 12, each month |
| Credit cards | APR | APR ÷ 365, each day, compounded |
| Savings | APY | Monthly, from the APY |
| Investment returns | Yearly (APY basis) | Monthly: (1 + rate)1/12 − 1 |
A loan's APR can include some fees as well as interest, so turning it into an APY here covers interest only. Inflation (definition, opens in a new tab) is always a plain yearly rate.
What should I check before choosing buy now, pay later at checkout?
A pay-in-4 plan with no interest costs the price, as long as every payment lands on time. The checkout screen leads with the first payment, the smallest number in the deal. Three questions bring the rest into view: what each payday owes, whether there's an APR, and what a missed payment costs.
Can each payday cover what's due?
Pay-in-4 payments come out every two weeks, often automatically from a debit card or bank account. When one lands before a paycheck does, a bank overdraft fee can show up on top of the plan's late fee (definition, opens in a new tab).
Is this plan 0%, or does it have an APR?
Longer plans paid monthly can charge interest. APR (annual percentage rate) is the yearly cost of borrowing, shown as a percent. Ask for it, and for the total paid.
What other plans are already running?
Each plan looks small on its own. Two or three at once, from one app or several, add up to what each paycheck owes. The calculator below stacks them.
Quick guess
Three plans: $400 paid in 4 today, $200 paid in 4 starting in 2 weeks, and $1,200 over 12 months. How much is due in the busiest two weeks?
Using the plans in the calculator below. Two-week windows start today.
What does a buy now, pay later plan really cost?
Enter each plan: the price, whether it's pay in 4 or paid monthly, and the APR if it has one. You'll see the total paid, the interest, what a missed payment adds, and how much is due in each two-week paycheck window and each month while several plans run at once.
Paid on time, all plans
$1,934
- Prices
- $1,800
- Interest
- $134
- Last payment
- in 12 months
- Busiest two weeks
- $261
- Busiest month
- $400
| Plan | Payment | Rate | Total | Interest |
|---|
See the payment table
| Two weeks | Due | Of which interest |
|---|
Show the math
- Pay in 4: the price ÷ 4, the first payment at checkout and then one every 2 weeks (weeks 0, 2, 4 and 6). No interest.
- Monthly: a fixed-rate installment (definition, opens in a new tab) loan charged APR ÷ 12 each month. Payment = price × r ÷ (1 − (1 + r)−months), with r = APR ÷ 12. The first payment is due one month after purchase.
- Windows start today: two-week windows of 14 days, and months of 365 ÷ 12 days. Real paydays and due dates fall on calendar dates, so the exact split can shift by a few days.
- Late fees: the fee entered × payments missed, counted at the first payment due after checkout.
- 1- and 5-year view: each dollar of interest and late fees, grown at the savings rate from the day it was paid. Savings compound monthly from the APY.
- Not included: extra interest a late payment can add on an APR plan, bank overdraft fees, and any effect on credit. Real plans round each payment to the cent.
What does buy now, pay later cost after 1 year and 5 years?
A pay-in-4 plan paid on time is done in six weeks and costs nothing extra. Monthly plans with an APR charge interest on what's still owed, which is debt compounding against you. The tables show what's paid, what's still owed, and what the interest and fees could have grown to in savings instead.
After 1 year
| Measure | All plans |
|---|---|
| Paid so far | |
| Still owed | |
| Interest and late fees | |
| Same money, in savings |
After 5 years
| Measure | All plans |
|---|---|
| Paid so far | |
| Still owed | |
| Interest and late fees | |
| Same money, in savings |
Interest and fees are the third bucket, money that compounds against you. In savings, the same dollars would compound for you.
What can I ask at checkout or the lender instead?
Checkout is built to make yes quick: the payment looks small and the button is one tap away. Lenders earn from what stores pay them, from interest on longer plans and from late fees. These questions put the total cost, the rate and the payment dates on the table before agreeing to a plan.
Before agreeing: a screenshot of the payment schedule and the terms keeps the dates and fees in one place.
At checkout
“What's the APR on this plan, and what's the total I'll pay?”
A 0% pay-in-4 plan and a monthly plan with an APR can sit side by side on the same screen. The total shows the difference in dollars.
Before agreeing
“What's the late fee, and how soon after a due date is it charged?”
The plan's terms set the fee. On a $50 installment, a flat fee can be a big share of that one payment.
In the lender's app
“Can I move my payment dates so they land after payday?”
Lining due dates up with paychecks lowers the chance of a missed payment, and of a bank overdraft fee on top of it.
Lender, before a due date
“I can't make this payment on time. What are my options before it's late?”
Asking before the due date puts the choices on the table while there is still time to avoid the fee.
Sources
- Consumer Financial Protection Bureau, Buy now, pay later: what to know: Plain-language answers on how buy now, pay later plans work, what they can cost, and how to file a complaint.
Educational only, not financial advice. The numbers are estimates based on what you enter. Real plans set their own rates, fees and due dates, so check the terms.