Buy Now, Pay Later: Your Guide to How it Works, When to Use It and When to Skip It

What is Buy Now, Pay Later (BNPL)?

Buy Now, Pay Later is growing steadily in Canada: spending through BNPL payments was up 12% in 2025 compared to the year before, and by 2030, it’s expected to double, reaching over US $11 billion.

But first things first: what is BNPL? Short for Buy Now, Pay Later, BNPL has gone from a niche payment option to one of the most common ways Gen Z and Millennials pay for… well, almost anything. Clothes, concert tickets, tech – you name it. The appeal is simple: fast approvals, small payments and (generally) no interest if you stick to the plan.

BNPL lets you buy something today and pay for it in installments, instead of all at once. The most common setup is “Pay in 4” – four equal payments spread out over a few weeks. Some providers also offer longer plans, sometimes with interest.

While BNPL can be a convenient option, it’s worth knowing how these plans actually work and how they compare to other borrowing options like credit cards and personal loans.

Popular BNPL Providers

You may have seen some of these names show up at checkout. Here are some of the most common BNPL providers in Canada.

• Affirm: A major player in the U.S. and Canada.

• Klarna: Offers different payment timelines and a well-known app.

• Afterpay: Used globally and popular for fashion and lifestyle purchases.

• PayBright (by Affirm): One of Canada’s earlier BNPL providers.

• Sezzle: Requires a 25% down payment on purchases, but in most cases offers no-interest loans.

• PayPal Pay in 4: Easy if you already use PayPal.

• PayPlan by RBC: The only BNPL solution backed by a Canadian bank.

How BNPL works in Canada

A big factor behind BNPL’s popularity is that it’s really easy to use. A typical BNPL experience looks like this:

1. At checkout:

   You spot the BNPL option and choose it.

2. Quick application

   Share a few details and set up an account. Depending on the provider, there may be a soft or hard credit check, or none at all.

3. Lock it in

   Once approved, confirm the plan, see your payment dates and finish the purchase.

4. Make payments

   Use the app or turn on automatic payments

The Benefits of BNPL

BNPL has become a mainstream payment option at checkout over the last few years, so what’s driving the hype?

Smooth online checkout

Because BNPL is built right into the online checkout experience, using it feels as easy as paying in full. You simply select the BNPL option when it’s time to pay, choose your payment plan, enter a few details and voilà, you’re all set with your new purchase.

The draw of interest-free payments

Pay in 4 plans are usually interest-free, as long as payments are made on time (longer terms typically come with interest).

But it’s critical to stick with the plan – if you miss a payment or pay late, you may get charged interest and/or fees.

The appeal for Gen Z

Gen Z shoppers make up 72% of BNPL in Canada. Here’s why it’s such an attractive payment option:

• Fits into tight budgets: Because BNPL breaks purchases into smaller payments, it helps manage cash flow.

• Opens credit to younger consumers: Approvals are quick, even if you haven’t built up much of a credit history yet.

• Clear payment schedules: You know exactly how much you need to pay and when.

• And honestly? A lot of the things Gen Z spends on – festival tickets, tech and fashion – aren’t cheap. Case in point: At Coachella, about 60% of general admission attendees used BNPL to pay for passes.

What to consider before using BNPL plans

BNPL can be super convenient, but it could also cause money stress if you’re not careful. It’s best to treat it like any other debt and plan for it in your budget.  

Late fees and NSF charges

BNPL might feel fee-free, but missing a payment can get pricey fast with some providers. And if an automatic withdrawal hits when your balance is low, you could also get charged Not Sufficient Fund (NSF) fees. Some plans may add interest over time, so keep an eye on the fine print.

Stacking multiple BNPL plans

One BNPL plan? Manageable. A few at once? Suddenly you’re juggling due dates and dealing with “phantom debt” you forgot you owed. Keep track of every plan and double-check your budget before adding another.

Impact on your monthly budget

Breaking a $250 item into small payments makes it feel affordable… but it’s not always the case, especially given your other expenses and maybe some other BNPL plans. One of the biggest risks of BNPL is how it can lead to impulse purchases, because expensive items suddenly feel cheaper. Something to think about: If your living costs are unexpectedly higher one month, will you still be able to make your BNPL payments?

Building a budget is one of the best ways to get a handle on your money. Whether you use paper, a spreadsheet or an app such as RBC’s NOMI, having a system makes it easier to stay on track. 

Fewer rules (and safety nets)

BNPL has fewer protections than credit cards. Approvals are easier, but that also means less support if you overspend or if your order gets lost or damaged. Refunds and disputes can be trickier without credit-card-style safeguards.

Returns can be complicated

If you return something you bought using BNPL, you may still be on the hook for payments until the retailer approves the return and refunds the BNPL provider.  

Does BNPL affect your credit score?

While the early days of BNPL didn’t have any impact on credit scores, more and more providers are introducing credit checks. Here’s a quick lowdown:

• Soft checks don’t affect your credit score

• Hard checks, usually for bigger purchases, can cause a small temporary drop in your score

• Missed payments are where the biggest impact is. If you’re more than 30 days late, the payment might get reported as overdue. If you’re very late, the debt might go to collections.

• Reporting varies by provider. Some report only late payments, some report full loan histories and some don’t report at all.

• Even if your BNPL activity isn’t appearing now, that could change. As rules shift, bigger BNPL plans are starting to look more like regular debt on your credit report.

Worried about the impact to your credit score? Here’s what you can do:

• Check your credit report: Take a look at your Equifax or TransUnion report to see whether any BNPL accounts are listed. This is the best way to know how your activity is being reported.

• Read the fine print: Before you choose a BNPL plan, scan the provider’s credit reporting policy.

BNPL vs credit cards and personal loans

BNPL isn’t the only way to pay for something over time. Some options are better depending on what you’re buying and how quickly you can pay it off.

When BNPL makes sense

• You’re buying something small or mid-priced

• You can confidently pay it off within the timeline

• You want fixed payments and no interest

• You don’t have or don’t want to use a credit card

When a credit card may be better

• You want flexibility in how much you pay each month

• You collect rewards or cash back

• You’re making a bigger purchase that may need insurance or extended warranty coverage

• You might need to return the item

• You can pay off the balance by the due date

When a personal loan might be the best option

• You’re financing something expensive over a longer period

• You want one predictable payment each month

• You’re consolidating several BNPL plans or other debts

Comparing costs and flexibility

What borrowing solution is right for you? Get the facts about your lending options.

How to use BNPL safely and responsibly

Using BNPL wisely comes down to staying organized and spending intentionally. Here’s how to keep it working for you, not against you.

Set payment reminders

Even with automatic withdrawals, knowing when payments hit helps you avoid surprises.

Track installments in your budget

Even if the installment amounts are small, make sure they’re in your budget. They can add up without you realizing.

Avoid using BNPL for essentials

If you have to use BNPL for your necessities, like groceries or Friday night takeout,  it’s a sign your budget is already stretched too thin. Reserve it for short-term purchases that will help you manage your cash flow.

Keep a small buffer

Leave extra money in your everyday banking account in case a payment hits earlier than expected.

What to do if you’re struggling with BNPL debt

If your BNPL payments are starting to feel overwhelming, you’re not alone. Many people find themselves in the same spot. The important thing is to recognize it early and take a few steps to get back on track.

• Don’t ignore the problem. Overdue payments won’t disappear

• Reach out to the providers to see if they can provide extensions or modified plans

• Create a strict budget to ensure your debts are covered each month

• Pause all new BNPL purchases

• Look into a low-interest personal loan to consolidate multiple BNPL debts into one payment

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