Until now, this popular payment method has been unregulated, what’s changed?
Buy Now, Pay Later continues to grow in popularity. It’s practically impossible to visit an online retailer and not see adverts encouraging you to use the service to pay.
One in four people in the UK have used it to buy something, according to the FCA. And use is going to keep growing.
But just because you can use it, should you? Now the service is regulated, I’ve taken a look at the benefits and risks associated with BNPL.
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What is Buy Now, Pay Later?
Buy Now Pay Later, or BNPL, is, at its most basic, the ability to delay or spread out your spending, usually without any charges or interest. You do this by taking out credit that is used to pay the merchant. You then owe the BNPL firm the cash you’ve borrowed.
This isn’t anything new — financing for large purchases has been around for years, when buying things like sofas, cars or kitchens. And often, people will use a 0% purchase credit card or catalogue credit for purchases like this. The term Buy Now, Pay Later is used when talking about short-term borrowing.
The main BNPL schemes, which this article will focus on, usually give you a couple of options to pay back what you borrow.
One is repaying in a month with no upfront payment. The other is splitting it over two or three months in equal instalments that start at the time of purchase and can be weekly, fortnightly or monthly.
This is how Klarna, Clearpay and PayPal work, as do newer offerings from Monzo and Zilch. But there are huge variations in how they work, so make sure you read the details before you apply.
As of July 2026, Buy Now Pay Later is now regulated in the UK. This means that providers will have to undertake proper affordability checks before lending you money, although it’s unlikely the providers will carry out hard credit checks. This means that now you’ll get Section 75 protection, the same as you would if you paid via a credit card.
Why use Buy Now, Pay Later?
There are a few reasons why people use a BNPL service. Some make more sense than others when it comes to your finances. Here are the key ones:
You can spread out the cost
BNPL allows you to split the cost out over time, whether for a single month or longer. Great when there’s an emergency or something expensive you need to buy, but you don’t have savings.
Of course, these types of purchases aren’t always why people use this feature. Plenty of people use it just as a matter of habit, even for everyday and non-essential purchases. You can now use it for as little as a can of beer and a packet of sweets.
One danger is you’ll overextend yourself and lose track of what you are still paying for month after month. Or if there’s a change in your income or expenses, you might find these purchases are no longer affordable.
Verdict: Use it only in emergencies or for large expenses that you can budget for.
It’s a free way to borrow
With most, there are no charges if you clear your payments on time. That means it’s interest-free and fee-free.
Surely there’s a catch? Well, rather than charge you, these firms make a profit by charging the retailers. You might think that’s odd, but it’s been proven that we’ll spend more money when using BNPL — either because we intend to return some of the items we buy, or because we look at the partial payment size rather than the total when working out whether it’s affordable.
But it’s only free if you make all your payments on time. If you miss any, some will charge late fees. There’s also the possibility that debt collectors could be called in for non-payment, which could lead to a county court judgment. That’s bad news for your credit report.
And watch out for longer splits, perhaps up to a year. These won’t be free, as they’ll have added interest. This typically makes it a more expensive way to borrow and might be subject to a hard credit check.
Verdict: It’s only free if you make your repayments on time and in full.
It’s an easy way to borrow
This is likely to change with the new regulations — the new affordability checks could remove Buy Now, Pay Later as an option for a lot of people going forward, even ones that have used it sensibly in the past. However, the FCA has said that checks should be quick and seamless, so it’ll likely be just as quick as before.
Historically, the limited credit and affordability checks meant those who couldn’t get credit elsewhere could borrow money via BNPL. This was handy for those with a thin or poor credit report, especially in an emergency. But it was bad news for those already struggling with debts.
Citizens Advice found that of BNPL users who had missed or made a late payment, more than half had been refused a credit card or other BNPL product. So getting more ‘easy’ credit just made the matter worse.
And with more firms now reporting Buy Now, Pay Later payments to the credit reference agencies, missed and defaulted payments could also hurt your chances when applying for other lending. However, it’s worth noting that making the payments on time could be seen positively by lenders.
Verdict: If you already have unmanageable debts, then look for free debt help instead.
It’s a quick way to pay
People often choose BNPL as it’s the default way to pay (sometimes retailers do this), and if you’ve got an account, it can be fast too. But entering card details into a website is hardly a chore.
This is where things are likely to change. When this has happened in the past, it wasn’t always clear that you were entering into a credit agreement. However, now, it will be required for the firm to give you clear information about what you’re agreeing to upfront.
Verdict: It’s just as easy to use a different payment option.
You can return unwanted items before you’ve paid for them
Shopping online, particularly for clothing, can mean you buy multiple styles and sizes in the hope that one will be the right fit. But it can take a while for your returns to be processed and the refund to be sent back to your bank.
This is probably one of the best benefits of BNPL, as it allows you to ship back some or all of the clothes before you’ve paid for them, meaning you’ll only pay for what you keep.
Except you still need to take those packages back to the courier or Post Office. And whether it’s because life gets in the way or you decide that you would actually like to keep more than you intended, this doesn’t always happen.
And even if you do send things back, there’s the risk that the return won’t be processed before your payment is due.
Verdict: Make sure you do return everything you don’t need.
You might get rewards or offers
There are sometimes discounts, free delivery or voucher codes offered at checkout when using BNPL. Elsewhere, some companies offer cashback and one offers fee-free spending overseas.
If you manage the BNPL purchase well, it’s not that different from using a cashback credit card, especially with the new regulations in play.
Verdict: As long as you manage the repayments, they could be worth a look.
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How to use Buy Now, Pay Later
There are a few different ways you can access BNPL services. The most common is at an online checkout, where you’ll often see one or a choice of BNPL options, along with traditional methods such as a credit or debit card and digital wallets such as Apple Pay or Google Pay.
Some services offer a BNPL card, sometimes physical but often digital (which can be added to your phone’s wallet). These work like a credit card, in that you can just use them to pay if the card is accepted, whether that’s online or in-store.
Or you might be able to generate a QR code which can be used in participating stores to send the payment to your account.
There won’t necessarily be a set credit limit, but there might be a spending limit. These often start quite small when you first join up, but could increase as time goes on.
How to get BNPL
You’ll either be able to apply at the checkout when paying, or you might need to apply in advance – it depends on the service.
There will now be affordability checks at this stage. This is to assess whether this is a suitable way for you to borrow, so you’ll need to provide some personal info.
Most of the time, the provider will just run a soft credit check on your report. However, you’ll find that there’ll be hard checks for BNPL provided by the banks (such as Monzo or Barclays).
With most services, you’ll be able to choose how you want to “pay later”. It could be that the whole payment is delayed by a month, or you might pay some now, and the rest in weekly or monthly instalments.
Watch out for longer-term repayment options as these could well come with full credit searches and interest payments.
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How to pay the money back
Again, they all work differently. Some set up with a Continuous Payment Authority (CPA) where money is taken automatically via the long number on your debit or credit card. It’s best not to use a credit card — you’ll get charged interest if you don’t clear the balance.
Others let you make payments manually or set up a Direct Debit. The latter is a better option as it’ll mean you don’t forget to pay, but you’ll need to make sure there’s enough cash in your current account to cover the payment.
You can set up notifications ahead of a payment coming out with most providers. This may become difficult to manage if you have multiple BNPL accounts with money coming out at different times.
It’s better to add reminders to your calendar and keep track of what you owe in BNPL every week to make sure you don’t overextend yourself.
If you find you’re struggling to make those repayments, then prioritise the ones with late fees.
Providers now need to let you know straight away if you miss a repayment. They also now need to direct you to free debt help if you’re struggling with repayments.
Should you use Buy Now, Pay Later?
Zoe’s analysis
Buy Now, Pay Later has been a little problematic since it launched, and it’s been in dire need of regulation since then, too. The main concern is the sheer number of retailers and services offering it as a payment option, sometimes for things that are already split into monthly fees — one of our team members recently saw it as a payment option for nursery fees; or for small everyday purchases — you can now use it to pay for groceries and takeaways. This ability to stack up debt isn’t far off from throwing it all on a credit card.
The new regulations are, ultimately, great. They will mean that people who can’t afford the credit won’t be offered it, and it puts more protection in place if things go wrong with your purchase.
Unfortunately, it’s likely become vital for those who use it frequently (and for a lot of them, sensibly), and the need for credit won’t go away, so the new regulations could make the service inaccessible to people who were using it before without any issues.
So should you use it?
There are times when splitting a payment over several instalments can help you budget more efficiently. I took out Monzo Flex because my weekly figure skating lessons were charged by term, rather than weekly or monthly. This let me split it up into payments that made more sense to me.
And when trying to find a suitable outfit for an event, sometimes ordering lots of styles and sizes makes sense, especially if you don’t have to pay right away.
You probably shouldn’t use it to buy things you ultimately can’t afford — if you have to split your takeaway into three monthly payments in order to afford it, you should probably budget your meals more efficiently.
There are some alternatives that you can consider — a 0% credit card can be helpful if you have a lot to buy in one go that you want to repay over time — such as if you’ve moved into a new house and need furniture.