What is Buy Now Pay Later (BNPL)?

Buy Now Pay Later (BNPL) is a payment option that lets you split a purchase into multiple installments, typically 4-6 payments over a few weeks or months. Popular BNPL providers include Klarna, Afterpay, Affirm, and others. BNPL plans often advertise "0% interest" but may charge fees (upfront fees, per-payment fees, or late fees) that add to your total cost.

Why "0% Interest" BNPL Can Still Have a Cost

Even when BNPL plans claim "0% interest," they may charge various fees that increase your total cost: upfront service fees, per-payment processing fees, or late fees if you miss a payment. These fees can add up quickly. For example, a $500 purchase with a $5 fee per payment over 4 payments adds $20 in fees, which is effectively a finance charge even without interest.

How BNPL Payments and Late Fees Stack Up

BNPL plans typically require equal installments over a short period (e.g., 4 bi-weekly payments). If you miss a payment, you'll likely face late fees that can be substantial (e.g., $10-25 per missed payment). Multiple late payments can significantly increase your total cost. Some providers may also suspend your account or report late payments to credit bureaus, which can hurt your credit score.

How This Calculator Approximates APR (and Its Limitations)

This calculator converts BNPL fees into an "implied" or "effective" APR to help you compare BNPL costs to credit card APRs. The calculation approximates the annualized cost of fees relative to the financed amount and payment period. However, this is a simplified approximation. Actual APR calculations can be more complex and may vary based on payment timing, compounding, and other factors. The implied APR is meant for educational comparison only, not as an exact financial metric.

Comparing BNPL vs Credit Card vs Pay Now

Pay Now: Pay the full purchase price immediately. No fees, no interest, no financing cost. This is always the cheapest option if you can afford it.

BNPL: Spread payments over installments but pay fees. May be convenient but adds cost. Risk of late fees if you miss payments.

Credit Card: Pay over time with interest. Cost depends on your card's APR and how long you take to pay off the balance. If you can pay off quickly, may be cheaper than BNPL with fees.