Buy Now, Pay Later: how it works and what to look out for

What to ask yourself before using Buy Now, Pay Later

As of 15 July 2026, Buy Now, Pay Later (BNPL) is regulated by the Financial Conduct Authority, something MoneySavingExpert.com and its founder Martin Lewis had long campaigned for. This means you're now better protected when using it, including by both Section 75 and the Financial Ombudsman Service.

Nevertheless, even if BNPL can be a cheap and now safe-ish way to borrow, it's still a debt. So before you dive in, have a think about how you'd answer these three questions:

1. Would I have bought this item in the first place if BNPL wasn't an option?
2. Am I sure I can meet the repayments?
3. Is BNPL the best form of borrowing for me? There are alternative ways to borrow.

If the answer to any of these questions is 'no', you might want to consider different ways to pay - or maybe not making the purchase in the first place...

Buy Now, Pay Later: what you need to know

We've got 16 need-to-knows about BNPL:

1. Spread the cost of spending over weeks / months

   

   Buy Now, Pay Later (BNPL) is a simple-ish concept.

   Instead of you paying a retailer for goods or services in full at the checkout, BNPL providers pay the retailer for you. You then repay the BNPL provider over a few weeks or months, effectively spreading the cost of your spending.

   This doesn't mean what you're buying is any cheaper. Rather, you've simply got more time to pay it off – which can help with cash flow.

   The main players in the BNPL market are Klarna, Clearpay, PayPal and Zilch. However, some retailers work exclusively with one BNPL provider, meaning there might be limited choice about which provider to use depending on where you shop.

2. It's interest and fee-free – so managed correctly, BNPL shouldn't cost you a penny to use

   One of BNPL's main draws is that it can be completely free to use.

   That's because most providers don't charge interest or fees to spread costs. And while late fees usually apply if you miss a payment, pay on time and you won't be stung by these – meaning BNPL shouldn't cost a penny.

   While spreading your costs over a number of weeks can help with cash flow, make sure you've always got a plan in place for repaying what you owe. And don't let it encourage you to overspend. Even if you can spread the cost of spending, you'll need money to repay the debt eventually, even if that's not immediately.

   How do BNPL providers make money if there is no interest?

   BNPL providers take a cut from anything they help a retailer to sell. One of their main pitches to retailers is that a BNPL option increases sales.

   
   

   Close

3. Repayments are usually fortnightly or weekly – so have a repayment plan in place

   The most common type of BNPL – the one we focus on in this guide – lets you spread spending over a short period, typically a number of weeks. But exactly how long a period you can spread your spending over and how frequently you need to make repayments will depend on which provider you use.

   Repayments are usually taken from your card or bank account by the provider automatically at set dates (a bit like a standing order), so you shouldn't need to set reminders to make repayments. Providers will remind you about repayments in advance, so ensure there's enough cash in your account in good time to cover it. 

   Klarna, for example, lets you pay in three instalments, the first at purchase, the second after 30 days and third after 60 days. It also has the option of paying nothing at purchase and clearing the balance in full up to 30 days later. So...

   If you use Klarna to buy a pair of £120 shoes, you could pay £40 at purchase, another £40 after 30 days and a final £40 60 days after purchase. OR you could pay nothing at purchase and have up to 30 days to clear the entire £120 balance.

   Here's a breakdown of how the main providers split your payments:

   BNPL – when do I repay? (1)

   Provider	How many repayments?	Frequency	When is the last payment?
   Klarna	3	At purchase, then every 30 days (2)	60 days after purchase
   Clearpay	4	At purchase, then every two weeks	Six weeks after purchase
   PayPal – Pay in 3	3	At purchase, then monthly (3)	Two months after purchase
   Zilch	4	At purchase, then either every 2 weeks or monthly	Either 6 weeks or three months after purchase

   (1) This table refers to 0% interest BNPL, not longer-term financing.
   (2) Klarna also has an option to pay nothing at purchase and then clear the whole balance up to 30 days later (known as 'Pay in 30').
   (3) PayPal also have an option to pay nothing at purchase and then clear the whole balance within 30 days (known as 'Pay in 30 Days').

   Normally, providers will let you clear your outstanding balance early if you wish.

4. Miss a payment and you could face late fees

   

   If you miss a BNPL repayment – be that because you forget or simply don't have enough funds in your linked bank account to repay – you might face late fees.

   Here's a look at what some of the main providers charge:

   • Clearpay charges late fees. An initial £6 late fee applies if a payment is seven days overdue. Overall late fees are capped at the lower of £24 or 25% of the order value (so £10 on a £40 item, for example).

   • Klarna charges late fees. If you miss a payment, you'll have up to 14 days to clear the arrears. If you don't, you'll face a late fee that's the lower of £5 or 25% of the instalment value, with a maximum of two late fees per instalment.

   • PayPal doesn't charge late fees. But may reject you for future credit.

   • Zilch doesn't charge late fees. But missing an instalment may negatively impact your credit score and if you miss too many payments, Zilch may place a block on your account.

   A provider should send you a notification if you miss a repayment due date and explain what will happen if you don't make up the missed payment.

5. Missed payments can hurt your credit file too

   In the UK, there are three main credit reference agencies: Experian, Equifax and TransUnion. Each holds credit report data on you that lists your past financial behaviour, such as repayment history and previous applications for credit. Lenders use the data on these reports to help decide whether to lend to you or not.
   
   While BNPL doesn't currently impact the credit 'score' you get from Equifax, Experian or TransUnion, BNPL usage often appears on the credit report you get from these agencies – increasingly so since BNPL became regulated in July 2026.

   This means if you're over reliant on BNPL, making late repayments or missing them altogether, it could damage your credit report and what lenders think of you. On the other hand, using BNPL responsibly and repaying on time could paint a positive picture on your credit file – helpful if you've a limited/poor credit history.

   If you are planning to use BNPL to bolster your credit file, be sensible – and check whether it's the right choice for you, or if there's another way to boost your credit that would better suit.
   
   This table shows which BNPL providers currently report to which agencies:

   Which credit reference agencies does your BNPL provider report to?

   Provider	Experian	Equifax	TransUnion
   Klarna
   Clearpay
   PayPal
   Zilch

   For more information on why having a good credit score is important, see our Improve your credit score guide. Plus, see how to check your credit reports.

6. You now have invaluable Section 75 protection

   Section 75 is an invaluable legal protection, previously just for credit cards but now also extended to BNPL agreements taken out from 15 July 2026 onwards (if your purchase was made before this, this protection won't apply).

   Section 75 means credit card and BNPL providers must protect purchases over £100 for free, so if there's a problem, like faulty goods or ones that don't arrive, you could get your money back.

   It used to be the case that Section 75 protection wouldn't work if a 'third-party payment processor' broke the direct link between a retailer and a credit card company, including using BNPL to spread the cost. So beforehand if you paid for an item on credit card that was over £100 but spread the cost via BNPL, you didn't have access to Section 75 protection.

   However, since BNPL became regulated on 15 July 2026, Section 75 protection has been extended and will now apply to any eligible agreement you have with a BNPL provider. This includes if you use a debit card to pay off the BNPL balance.

   For an agreement to be eligible for Section 75 it must:

   • Be over £100. While BNPL is increasingly being used for larger items, like holidays or technology, most purchases are still under £100 in value. For these you won't get Section 75 protection, but some providers will still offer their own protections - for example, Klarna's 'buyer protection policy' covers you for 120 days if your purchase doesn't arrive or isn't right.

   • Be no more than £30,000. Though this isn't likely with BNPL, as credit limits are typically much lower.

   See our Section 75 guide for full details on how this valuable protection works.

7. BNPL can be used in store as well as online

   BNPL started out online, but these days it's widely available in-store too.

   And it's not just clothing lines where BNPL can be used. It's available in a variety of other sectors too, including gardening, homeware, toys and much more. The spread of retailers that allow you to pay via BPL is huge, and includes the likes of Asos, Halfords, Adidas, Marks & Spencer and Anthropologie.

8. Everyone has a different spending limit

   BNPL providers set you a credit limit based on your credit rating, 'affordability' and providers' internal algorithms. Not everyone's credit limit will be the same.

   Some providers may set you a smaller spending limit if you're a new customer, which can increase over time, depending on whether you miss repayments. The likelihood is your credit limit will be somewhere in the £100s, not in the £1,000s.

   Bear in mind that since BNPL became regulated in July 2026 providers need to run stricter affordability checks. This might mean that you're not able to borrow as much as you were previously, or that your existing credit limit might change. For others, it could mean you're able to borrow more.

   Importantly, credit limits are per provider, not across all providers. While some BNPL providers might see from your credit file whether you've taken out other BNPL agreements when they run their checks, this all depends on which credit reference agencies they each report to.

   This means debts across several BNPL providers can still build up. So the burden falls on you to be disciplined: don't be tempted to overspend if you know you'd struggle to repay what you borrow.

9. You're unlikely to undergo a 'hard' credit check

   When applying for BNPL you're unlikely to undergo a 'hard' credit check. A hard check would leave a search mark on your credit file for other lenders to see, and too many marks in a short space of time can be a bad thing for your credit file.

   Instead, you'll probably have a 'soft' credit check run on you. Soft checks are invisible to other lenders, meaning BNPL providers may not be able to tell that you're borrowing from other providers when deciding whether to lend to you – in other words, they may make a decision without the full picture.

   They may however be able to see existing accounts you have with other providers if they report agreements to the same credit reference agency, and could make a decision about whether to lend to you based on this behaviour.

   Yet don't be tempted to think of BNPL as easy money. Whatever you borrow you'll need to repay, so make sure you always have a repayment plan in place.

10. Serial returner? No need to wait for refunds

    One benefit of BNPL is you only pay for what you actually end up keeping, which could be much less than what you purchase through BNPL at the checkout in the first place. This can be handy for people who regularly return items.

    Over to MSE Amalia to explain:

    Let's say you're buying a dress, but aren't sure which size fits. You could order a few sizes and return the ones you don't want – meaning you'll only pay for one of them. And if you pick Klarna's option to pay in full up to 30 days later, you can avoid an initial payment instalment leaving your account in the first place if your returns arrive on time.

    

    In general, you'll need to arrange returns directly with the retailer and in line with its returns policy, though some BNPL providers can deal with returns themselves.

    Until a return has been processed by the retailer, you'll need to pay any instalments due to your BNPL provider. Once an item has been successfully returned, your BNPL payment schedule should be amended. The exact process varies by BNPL provider, so it's important you check what the T&Cs are.

11. You can sometimes 'push back' a payment

    If you need extra time to make a repayment, check whether your provider will allow you to reschedule the payment. Try not to miss a payment deadline, as this can result in late fees or negative marks on your credit file.

    Here are the options with the main BNPL providers:

    • Klarna. You might be able to extend a repayment due date (available in the app). This has no impact on your credit file and doesn't incur fees or interest.

    • Clearpay. You might be able to reschedule a payment by up to seven days, though only if there's more than 24 hours before the payment is due. This is at no extra cost and has no impact on your credit file.

    • Paypal Pay in 3. You might be able to push back a payment by up to one month if you're experiencing financial hardship. There's no extra cost to this and no impact on your credit file, though you'll have less chance of being accepted for new spending via Pay in 3 in future.

    • Zilch. You might be able to 'snooze' payments by either 4 or 8 days, but Zilch charges a fee for this (75p per instalment snoozed for 4 days or £1.50 for 8).

    Need extra or longer-term support?

    If you're continually struggling to repay, the best thing to do is reach out to your BNPL provider – preferably before you miss any repayments. The help available will depend on the provider, and bear in mind some types of support, such as a payment holiday, may appear on your credit file.

    Now that BNPL is regulated, providers have to carry out proportionate affordability checks so you shouldn't be sold a product you can't afford. If you think you've been mis-sold BNPL, you can now complain to the Financial Ombudsman Service (provided you took out the agreement on or after 15 July 2026).

    Also see our Debt help guide and Mental health and debt booklet.

12. You can complain if you're unhappy – including now to the Financial Ombudsman

    Now BNPL is regulated, you have access to the Financial Ombudsman Service. This is a free dispute resolution service, which can order firms to pay you compensation.

    In the first instance you should raise a complaint with the BNPL provider directly and give them the opportunity to resolve it. This step is important as the ombudsman will ask you for proof to see whether you tried to settle your dispute with the company first. Where you need help making a complaint, you can go via Resolver, a free-to-use complaints tool.

    For example, if you think you shouldn’t have been approved for the money in the first place because you couldn’t afford it, you should complain to the BNPL provider and tell them you don’t think their affordability checks were right. If they don’t respond, reject your complaint, or their resolution isn’t acceptable to you, you can then go to the ombudsman.

    Take a look at our financial ombudsman guide for more information on how to complain and what to expect when you do.

    If you're trying to get a refund specifically and the retailer refuses (and your purchase is between £100.01 and £30,000), you can use Section 75.

13. Monzo and Barclays BNPL work differently

    

    Monzo has its own version of BNPL called 'Flex' (you need a Monzo current account to get it), while Barclays also has a type of BNPL called 'Instalments by Barclays'.

    While these both let you spread the cost, they differ to other types of BNPL. For starters, you may have to pay interest – we explain more below. Secondly, it can be harder to get into debt as applying will leave a hard search on your credit file, meaning other lenders can see you've applied for credit.

    With both Flex and Instalments by Barclays, your repayments are reported to the credit reference agencies. Assuming you repay on time, this could help boost your credit history, whereas paying late could have an adverse effect on your credit file.

    Monzo Flex – how it works

    With Monzo Flex you can spread the cost of payment while at the checkout, or after the purchase has been made (max 14 days after purchase). If you flex after you've paid, Monzo will partially reimburse you and a payment plan will be set up.

    To spread your payments interest-free, you'll need to repay in three instalments over a three-month period and the cost of the item/service needs to be over £100. You can repay over six or 12 months, but this isn't interest-free.

    Instalments by Barclays – how it works

    Instalments by Barclays allows you to spread the cost of something costing more than £100 on Amazon. Depending on the cost, you'll be offered a repayment plan lasting somewhere between three months up to as much as 48 months.

    But crucially, and unlike most BNPL providers where spreading is free, Barclays charges interest on its payment plans. So, unless it's offering a promotion, what you purchase will end up costing you more than if you paid for it in-full up front.

14. A 0% credit card or overdraft might be a better way to borrow – compare the pros and cons

    BNPL is a form of credit, so it makes sense to consider it against more traditional forms of credit, such as a 0% credit card or 0% overdraft. Which is best for you will depend on your circumstances, the amount you need to borrow, how easily you'll be able to repay, and how much protection you want.

    For example, a 0% overdraft doesn't offer valuable Section 75 protection, but credit cards and BNPL do. However, the time you have to repay a 0% overdraft or 0% credit card is typically longer than you might get for BNPL.

    For full help, have a read of our 0% credit cards and 0% overdrafts guides. In the meantime, we've compiled a table below which compares the basics.

15. There is also long-term BNPL – but it's different

    Some BNPL providers allow you to spread the cost over many months or a few years, rather than weeks – you might even be able to borrow more too.

    For example, Klarna has a 'financing' option, allowing you to spread repayments over a period of between six and 24 months. Another provider, Newpay, lets you spread repayments over up to 48 months.

    Yet this type of BNPL is different to the one discussed in this guide, as:

    • You'll undergo even more rigorous affordability checks. So a 'hard' credit check will be left on your credit file when you apply, and you won't necessarily be accepted. You'll likely have to sign up to an official credit agreement. 

    • You might be charged interest – so this type of BNPL isn't always free. This is a big difference to the type of BNPL covered in this guide.

    If you see anything about APRs or repaying over a period longer than two months, then you're probably looking at this form of longer-term BNPL.

    Before you sign up, consider if a 0% credit card or 0% overdraft is a better option.

16. Struggling with debt? Help is available

    Many people struggle with debt, and this includes BNPL debt. If you're struggling to solve a debt problem, it's important to seek help before matters get worse.

    In the first instance, take a read of our Debt problems guide, which includes tips on how to sort your spending and cut the cost of debt.

    And if things are really tough, talk to a non-profit agency like Citizens Advice, StepChange or National Debtline. They'll be able to offer free and impartial advice.