Buy now, pay later: how it works and what to look out for

What to ask yourself before using buy now, pay later

While buy now, pay later (BNPL) can be a cheap 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', arguably you shouldn't be using BNPL...

Buy now, pay later: what you need to know

We've got 17 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 (it has 18 million UK customers, working with more than 30,000 retailers), Clearpay and Zilch. In addition, PayPal has a 'Pay in 3' product, while major bank Monzo is also part of the market.

   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.

   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.
   

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

   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 (2)	3	At purchase, then every 30 days	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	Two 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').

   Normally you're able you to clear your instalments or outstanding balance early.

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 order value, with a maximum of two late fees applying per order.

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

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 is increasingly beginning to appear on the credit report you get from these agencies. And this will become more common as the BNPL sector becomes regulated from 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.

   However, BNPL is currently unregulated and easy to access, meaning you've little protection and can easily get into debt. So, if you are planning to use BNPL to bolster your credit file, be sensible – and check if there are better ways to do this.
   
   The 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 – Pay in 3
   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. There's no Section 75 protection

   Section 75 is an invaluable legal protection for people who use credit cards.

   It means credit card providers must protect purchases over £100 on credit card for free, so if there's a problem, like faulty goods or ones that don't arrive, you could get your money back. See our Section 75 guide for more on how it works.

   However, Section 75 protection doesn't work if a 'third-party payment processor' breaks the direct link between a retailer and a credit card company, including using BNPL to spread the cost. So if you pay for an item on credit card that's over £100 but spread the cost via BNPL, you won't have access to Section 75 protection.

   Rather, you'd have to check what guarantees your BNPL provider gives, complain to the retailer directly, or try a chargeback request (though this isn't a legal right).

   Section 75 will eventually apply to BNPL payments once the BNPL sector becomes regulated, but this isn't set to happen until July 2026.

   Klarna 'pay now' service has no Section 75

   Klarna also has a 'pay now' option. This enables you to pay in full, up-front using a card/account linked to your Klarna account – rather than spreading the cost. But beware that you'll STILL lose Section 75 protection, just like you'd lose it if you used BNPL to spread the cost.

   See Beware using Klarna's 'pay now' service for more.

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, Clas Ohlson, Adidas, Marks & Spencer and Anthropologie.

   Klarna available on Apple Pay. Users of Klarna with an iPhone and iPad on iOS 18 and iPadOS 18 or later can check out on Apple Pay online or in the apps.

   Select 'Other Cards & Pay Later Options' when checking out on Apple Pay, then select Klarna to access the Klarna products. Once you agree to the terms, double-click the side button and authenticate with Face ID or Touch ID to confirm your purchase. 

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.

   Credit limits are per provider, not across all providers. No provider knows how much you're borrowing from another provider, meaning debts across several BNPL providers can 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.

   Once BNPL becomes regulated in July 2026, providers will be required to run stricter affordability checks, something which could impact your credit limit further.

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. 

   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.c

    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.

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

12. You can complain if you're unhappy

    Where you've got a complaint about an item or service you've bought, in the first instance you should contact the retailer. If you're trying to get a refund specifically and the retailer refuses, it might be worth trying the chargeback process instead.

    Where you need help making a complaint, an alternative is to go via Resolver, a free-to-use complaints tool. Resolver can also help escalate your case to the free Financial Ombudsman Service where necessary.

    If your issue is with a BNPL provider specifically, the complaints process is similar. Either follow the instructions on your provider's website, or complain via Resolver.

    Do note that currently it's not possible to escalate a complaint about a BNPL provider to the Financial Ombudsman, but this will change once the BNPL sector becomes regulated in July 2026 (more on this in the point below).

13. BNPL is set to become a regulated sector – meaning you'll have greater protection

    The BNPL sector is currently unregulated, meaning you've less protection when using it compared to other forms of borrowing. However this will change from July 2026, when BNPL becomes a regulated sector.

    Full details in our BNPL regulation news story, but in brief:

    • Lenders will have to carry out stricter checks. When you apply for a credit card or loan, lenders have to carry out stringent affordability checks to ensure you can afford repayments. They're also required to tell you about the product, and let you know what happens if you don't pay.
      
      The affordability checks BNPL providers are far less rigorous in comparison, but these will become stricter once regulation kicks in.

    • You'll be able to complain to the Financial Ombudsman. Currently it's not possible to go to the independent Financial Ombudsman if you've got an issue with or complaint about a BNPL provider that can't be resolved, as it can only look at complaints about regulated products and services. Once regulation kicks in though, you will be able to take BNPL complaints to the Ombudsman.

    • You'll gain Section 75 protection. When you buy something on credit card worth £100 or more, credit card providers are required to safeguard the purchase through Section 75 protection – though NOT if you've split the cost via BNPL. Once regulation kicks in, Section 75 will begin applying to BNPL.

14. Monzo and Barclays BNPL works 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're different to other types of BNPL. For starters, you may have to pay interest – we explain more below. Secondly, you're better protected than you would be with other BNPL providers, as:

    • It's harder to get into debt. Applying will leave a hard search on your credit file, meaning other lenders can see you've applied for credit.

    • You can complain to the Financial Ombudsman. As BNPL through Monzo and Barclays is regulated, unlike BNPL from most other providers. 

    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.

15. 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, BNPL doesn't offer valuable Section 75 protection, but credit cards do. However, your credit limit with a credit card is likely to be bigger than with BNPL, meaning the temptation to overspend might be greater – plus the financial cost of not repaying a credit card is higher.

    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:

    BNPL versus 0% credit cards versus 0% overdrafts (1)

    	Buy now, pay later	0% credit card	0% overdraft
    Section 75 protection?	❌	✅	❌
    Can I complain to Financial Ombudsman?	❌	✅	✅
    Does it do a hard credit check?	❌	✅	✅
    Do I get quick access to credit?	✅	❌	❌
    How long do I have to repay?	Usually up to six weeks	Up to 24 months	Up to 12 months (2)

    (1) Excludes Monzo Flex and Instalments by Barclays. (2) Some lenders also offer overdrafts that are interest-free for an ongoing period. For example, First Direct offers overdrafts where the first £250 overdrawn is interest-free, but charges 39.9% EAR variable above this.

16. 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 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.

    • You're able to complain to the Ombudsman. As longer-term BNPL is regulated, this means you've got access to the free Financial Ombudsman.

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

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

17. 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.