Just the Facts: Buy Now Pay Later (BNPL)

Buy Now Pay Later is a low-cost and easy-to-use payment option. 

Pay-in-four Buy Now Pay Later (BNPL) is a transparent, interest-free payment option that lets consumers split a purchase into four installments with clear repayment terms. Each BNPL loan is individually underwritten, with fixed repayment dates, no revolving balances and no hidden fees. Purchases are typically small-dollar, with an average loan size of $135. Consumers across ages, income levels, and demographics value BNPL as an additional payment option at checkout.  

Here’s a snapshot of how a pay-in-four BNPL transaction works:

Buy Now Pay Later is more consumer-friendly than legacy credit products.

The BNPL business model is centered on consumer success, not interest or fees. Unlike credit cards, which generate most of their revenue from interest and late fees, BNPL providers do not charge interest and primarily monetize through merchant fees. Late fee policies vary across providers, with some not charging late fees at all. Furthermore, BNPL providers pause late payers from using their service, helping consumers avoid the vicious cycle of debt due to compounding interest charges or rollovers. 

Consumers are using BNPL responsibly, repaying in full and on time.

The vast majority of people repay their BNPL loans in full and on time. According to a 2025 Consumer Financial Protection Bureau market monitoring report – which relied on real transaction data, not survey responses – only 4.1 percent of BNPL loans were assessed a late fee, and 1.83 percent were charged off or uncollectible. That means 98% of BNPL loans are repaid, and 96% are repaid on time. Additionally, 90% of consumers who request late fee waivers receive them, and late fee revenue represents just 0.18% of total loan volume.

In contrast, nearly one in five Americans (52 million) has paid a credit card late fee, credit card debt now tops $1.28 trillion, and credit card default rates are nearly 10%. The high repayment rates for BNPL reflect providers’ commitment to transparency and consumer protection. BNPL tools clearly notify users with reminders before payments are due. Repayment plans are clearly articulated and always accessible in the app or in a user’s account. 

Buy Now Pay Later expands access to credit for underserved consumers.

BNPL reaches consumers who have historically been underserved by traditional financial institutions, including those with limited or no credit history who might otherwise rely on payday loans, overdraft fees, or high-interest credit cards. Because each transaction is individually underwritten, consumers with limited credit history can gain access to affordable credit without the high interest rates of alternative products. Growth in BNPL adoption is not evidence of market failure, but rather evidence that the product is meeting a genuine need.

Use of Buy Now Pay Later should enhance credit scores, not lower them.

Consumers who use BNPL payment options responsibly should be able to build positive credit scores. We support the modernization of credit reporting bureaus to make their scoring practices and data collection more transparent and inclusive of innovations such as BNPL. Credit bureaus have traditionally relied on long-term payments, such as mortgages and car loans, to assess creditworthiness and do not capture the positive impact of short-term repayments on BNPL loans. That’s why our members are in active conversations with credit reporting agencies and other entities to modernize scoring models with BNPL-related data and ensure that prompt repayment of BNPL products does not negatively impact credit scores. 

The industry supports appropriate, risk-based regulation for BNPL products. 

BNPL products already comply with existing state and federal regulations and are subject to key consumer protection laws. Those protections cover anti-money laundering, fair lending, debt collection, privacy, fair treatment of customers, and electronic fund transfers. Many pay-in-four BNPLs are issued through bank partnerships and thus are subject to the same requirements as any bank loan. Additionally, the federal banking agencies – the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), and the Office of the Comptroller of the Currency (OCC) – have direct visibility into these lending partnerships through their supervision of the chartered banking entity.

Our industry welcomes appropriate regulation that recognizes the unique characteristics of BNPL products. We support transparency and clear disclosures so consumers understand their payment obligations, due dates, and total cost of the purchase. But shoehorning BNPL products into regulations written for credit cards fails to serve consumers and fundamentally mischaracterizes the product. When a product is demonstrably serving consumers well, regulations should match the actual risk, not import frameworks designed for fundamentally different products.

BNPL is fundamentally different from a credit card. 

Credit cards are revolving credit products designed for ongoing borrowing. Cardholders can carry balances month after month, incur interest charges, and repeatedly borrow up to their credit limits. In contrast, BNPL loans are short-term and closed-end products. with fixed payment schedules and never any interest charged. The typical 6-week repayment term illustrates why credit card frameworks — such as periodic billing statements and dispute rights — do not translate appropriately to BNPL pay-in-four. 

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