If you’ve shopped for anything online recently, you’ve no doubt seen the payment options from companies like Affirm and Afterpay where you can pay the bill over time in four equal installments with no interest.
Use of these buy now, pay later (BNPL, also called pay-in-four) loans has exploded. During Cyber Week this year alone, 85 percent more purchases were made with buy now, pay later loans than just a week earlier, according to figures from Adobe Analytics, a research firm.
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But now more than ever it pays to understand how BNPL lenders compare with one another—because for the first time, consumers can sometimes now choose which one to use when making a purchase. Until recently, online retailers typically partnered with a single buy now, pay later service, but some now offer you multiple choices. And all six of the main companies now offer “virtual credit cards” that you can use almost anywhere to get a pay-in-four loan, including at some walk-in stores.
To help, we did a side-by-side review of the pay-in-four options offered by six popular buy now, pay later companies—Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip. Use it to help you decide which BNPL you prefer, or which to avoid, if you decide to pay for purchases this way.(CR is continuing to evaluate digital financial products such as BNPL services and expects to publish additional information about them in the coming months.)
First, a few big similarities: In all cases, it’s easy to get a buy now, pay later loan. A quick application process results in a fast “yes” or “no” credit decision with no harm to your credit. All the pay-in-four loans are offered at 0 percent interest and with no fees for taking the loan. And none of the companies typically report late payments to the credit bureaus.
They also share some serious downsides, the biggest being how they can lure you to overspend. According to an August 2022 Consumer Reports nationally representative survey of 2,013 U.S. adults (PDF), 45 percent of people who have used BNPL said they used the loan service because they couldn’t afford the purchase otherwise.
Also concerning: As relatively new services, buy now, pay later companies are subject to virtually no regulatory oversight, says Chuck Bell, who focuses on consumer financial services at Consumer Reports, and who authored a recent analysis of the buy now, pay later industry. (Last December, the Consumer Financial Protection Bureau initiated an investigation into the business practices of these companies, which is ongoing.)
But there are some key differences, too, regarding fees, grace periods, payment flexibility, and more. The chart below shows the policies and practices of the big six companies side by side. Here are some of the major distinguishing factors in close-up.
How 'Pay-in-Four' Loans Compare
All six services offer these loans at no interest, and only do a soft credit check for approval, so you credit score itsn't affected. Each service has a smartphone app you can use to track balances, make payments, make additional purchases, and view any reward programs the services offer (typically discounts and other perks with select retailers).
Loan limit
Late fees
Grace period
Reschedule payment
Non-payment sent to collections
Affirm
$25,000
No
No
No
Yes
Afterpay
Individ-ualized
$8 or 25%
of total due, whichever is less (1)
Yes
10 days
Yes
Up to 7 days (2)
Yes
Klarna
Individ-ualized
$7 or 25%
of amount due, whichever is less
Yes
10 days
Yes
Up to 14 days
Yes
PayPal
$1,500
No
Yes
3 days
No
No
Sezzle
Individ-ualized
No
Yes
48-hours
Yes
Up to 14 days (3)
No
Zip
$1,500
$7
Refundable
No
Yes
Up to 7 days (4)
Yes
(1) If a single payment is missed, Afterpay suspends your ability to spend again using the service. (2) Can reschedule up to six times per year. (3) Suggest contact customer support at least 48 hours before payment due date. (4) Must contact customer support at least 24 hours before payment due date.
Repayment Flexibility and Late Fees
If your payment is late, Affirm and PayPal won’t charge a fee, but Afterpay, Klarna, and Zip will. Note: Zip says you can request to have its $7 late fee refunded if you’ve made the payment and your account is otherwise in good standing.
Afterpay, Klarna, Sezzle, and Zip also offer the ability to reschedule or extend the time period over which you make payments, although details vary. Affirm and PayPal do not offer this flexibility. A Klarna spokesperson told CR that people who need additional time to pay can “get in touch and a member of our team will be happy to help.” With Affirm you can apply for hardship help to extend your loan terms.
Grace Periods
Afterpay and Klarna both provide a 10-day grace period—a window of time after the due date before you are dinged for your tardiness with a fee or other penalty.PayPal’s grace period is three days, while Sezzle’s is two.
But neither Affirm nor Zip offers a grace period. A Zip spokesperson told CR that the company “will always make an effort to work with a customer that is experiencing hardship.”A grace period doesn’t apply to Affirm, a spokesperson told CR, since “there are no late fees.”
Make Sure Your Finances Are Protected
Sign our petition urging the CFPB to put in place strong rules for buy now, pay later services.
Credit Score Help . . . and Harm
If you want help building up your credit score, only Sezzle helps you do this. It offers a free program called SezzleUp. Once you sign up, the company will report your on-time payments to the three major credit bureaus—Equifax, Experian, and TransUnion—which can help improve your credit score over time.
But that cuts both ways: If you miss a payment, Sezzle says it might report a late payment to the credit bureau, which could hurt your credit score. None of the other companies will take that step.
But if you stopped paying your pay-in-four loan altogether, all the companies could come down hard. Affirm says it will turn your unpaid bill over to debt collection after 120 days of nonpayment. Afterpay, Klarna, PayPal, and Zip say they might do the same but are vague about thecirc*mstances that would trigger taking that action. Sezzle says it does not turn unpaid debt over to collections.
Assistance With Purchase Disputes
If you want a refund or an exchange, all buy now, pay later services direct you to follow the merchant’s return policy. But if you never received the product or it’s significantly delayed, it was damaged upon delivery, or the item you received doesn’t match what you ordered—and the merchant won’t give you a refund—the services may help you out in different ways.
PayPal offers purchase protection similar to a traditional credit card’s, reimbursing you for the full purchase price plus any shipping costs if the dispute is ruled in your favor. Payments are put on holdwhile the situation is investigated.
Sezzle and Affirm will act as a mediator between you and the merchant if you file a dispute.
Afterpay and Klarna won’t mediate between you and the seller. But filing a dispute will temporarily halt payments until your issue is resolved.
Lisa L. Gill
Lisa L. Gill is an award-winning investigative reporter. She has been at Consumer Reports since 2008, covering health and food safety—heavy metals in the food supply and foodborne illness—plus healthcare and prescription drug costs, medical debt, and credit scores. Lisa also testified before Congress and the Food and Drug Administration about her work on drug costs and drug safety. She lives in a DIY tiny home, where she gardens during the day and stargazes the Milky Way at night.
