Buzz
With the rise of Buy Now Pay Later (BNPL) services in retail, the demand for interest-free installment plans has led major payment platforms like PayPal to introduce their own versions. If you're a PayPal user unfamiliar with this option, here's a breakdown of how it works and how to get started.
What is BNPL?
BNPL is a short-term financing method that allows you to pay for medium-sized purchases (typically between $50 and $600) in monthly installments without accruing interest. It's now a common feature on checkout pages of major retailers like Urban Outfitters and Sephora, and has seen a significant surge in use since the pandemic began, with an 18% increase in users since last July, according to a recent Ascent survey.
Purchases are divided into installments paid over several months, with no interest charged. BNPL is often referred to as 'digital layaway,' but unlike traditional layaway programs, you receive the product immediately. One of the main advantages of BNPL is that you don't need a high credit score to qualify for this form of payment.
If there’s no interest, what are the drawbacks of BNPL?
While BNPL doesn’t impose ongoing interest like credit cards, it does come with late fees ($10-15) and transaction fees (4-6%), which can hurt your credit score. It's important to read the fine print—although BNPL services initially don’t charge interest, some may start doing so if you fall behind on payments (PayPal does not charge interest).
In short: If you're prone to overspending or lack a clear plan to pay off your purchases, it might be best to avoid BNPL and stick with using a debit card instead.
How to use PayPal's 'Pay in 4'
Using Pay in 4 is straightforward if you know where to find it. When you’re at a retail site’s checkout, look for the familiar PayPal button as your payment option (you might also see a “Pay Later” button—both will work). If you have a PayPal account already linked to a debit or credit card, just click that button, and you’ll be taken to a payment screen. You may need to scroll, but you should spot a “Pay Later” option with “Pay in 4” included.
Once you reach this point, PayPal will perform a soft credit check (which won't impact your credit score), and you’ll either be approved or denied for the purchase. If approved, a payment summary will show up (“four interest-free payments of $31.25, due every two weeks starting today”), which you can confirm by selecting the option and clicking “continue” at the bottom of the page.
If you’re using a debit card, the payments will be automatically deducted as scheduled (be mindful of overdraft fees). For those with a PayPal linked to a credit card, it’s a good idea to set up automatic payments immediately after making a purchase on an installment plan (just in case you forget later).
