More and more businesses are offering “Buy Now, Pay Later” (BNPL) options for products. This method of payment is becoming more popular, especially for people in their 20s and 30s. Twenty-six per cent of Canadians have used these plans to pay for their purchases. 

I have many clients who are making BNPL payments for multiple items. The payments come out of their bank account at different times, are varying amounts, and it is difficult to keep up with the payments. 

BNPL is a way to make installment payments online or in-store without paying the full value of the item up front. BNPL is mainly used online. It acts like getting instant credit and spreads the payments over weeks or months. Some short-term plans don’t charge interest if the payments are made on time. Longer-term plans may charge interest that you agree to when you make the purchase. 

These services are usually offered through third-party companies that use mobile apps. There is usually an eligibility check done by the mobile app. This can include:

• Verifying the buyer’s identity to prevent fraud
• Performing a soft credit report check to make sure the customer has a high enough credit score. 
• Reviewing past BNPL purchases to make sure the customer has a history of paying back loans. 

If the customer passes the eligibility check, an initial payment for the item is made, around 25% of the cost. The remaining balance is divided into installments. The company selling you the item is paid the full amount by the BNPL service provider, minus a processing fee. 

During the payback period, the BNPL service provider sends the customer information about the amount owing and when it should be paid. Payments can be through cheque or bank transfer or authorized automatic deductions from bank accounts, debit accounts, or credit cards. Some BNPL service providers may require one option over others. 

Thank you to Square for their article about BNPL. (Be aware that Square is a BNPL service provider, so it is promoting BNPL services to companies and customers.)

BNPL Benefits for customers	Disadvantages of BNPL for customers
Easier budgeting – 42% of Canadians using BNPL say it helps them manage money by breaking larger purchases into predictable payments.	Overspending – BNPL reduces the pain of paying in full, which can make the purchase feel more affordable than it is.
Immediate access – Unlike layaway, customers can take products home right away.
Low-cost financing – Pay-in-4 plans are typically 0% interest when payments are made on time, making them a cheaper option to carrying a balance on a credit card.	Missed Payments – 4.5% of Canadians reported paying a late fee due to missed installments, having to pay interest or late fees on transactions.
Accessibility – Many BNPL providers only run a soft credit check, so those with limited or no credit history can qualify.	Taking on too much debt – Because most providers only run a soft credit check, customers buying from a business can take on multiple installment plans across different platforms.
Potential credit-building – Longer-term BNPL loans are increasingly reported to credit bureaus, so on-time payments can help to build a positive credit report and score.	Credit score impact – Longer-term BNPL loans reported to credit bureaus can hurt customers’ credit scores if payments are missed.

You don’t need a credit card to use BNPL plans. You can use your bank account. This makes these plans more available to those with low or poor credit scores. Some BNPL plans are beginning to report how someone uses the plans to the two credit bureaus in Canada, TransUnion and Equifax. 

Research published in March 2025 found that U.S. shoppers who used buy now, pay later had sharp increases in bank overdraft charges and credit card interest and fees compared to those who didn’t use buy now, pay later services. There isn’t enough Canadian research on the subject yet to see if there is a difference between what is happening with US shoppers and Canadian shoppers.