Buy now, pay later

How it works

The fee is the decision. BNPL commonly lands somewhere in the region of 3% to 6% of the order plus a small fixed amount, deducted before payout, against roughly 2.5% to 3% on a card sale. Providers price by plan. A pay-in-4 arrangement normally costs less than a longer interest-free instalment plan, because the provider funds the balance for longer. Work out whether the bigger baskets, and the orders you would otherwise have lost, cover that gap at your margin.

The option sits next to the card fields at checkout. The provider scores the application in seconds, usually with a soft credit check that leaves no mark on the shopper's credit file, and approves or declines on the spot. Approved orders confirm straight away. You are paid the order value less the provider's fee on its payout schedule, not as the customer repays, and the shopper settles up with the provider, most often in four payments over six weeks.

Repayment risk and dispute risk are different things, and the provider only takes the first. If a customer says the goods never arrived or arrived faulty, the provider refunds them and recovers the money from you. BNPL also settles on its own schedule with its own fee line, separate from your card volume, so it sits outside your card effective rate until you deliberately fold it in.

Worked example

A $600 sofa costs a furniture shop $15.70 to take on a card at 2.6% + $0.10, leaving $584.30. Through a pay-in-4 provider at 5% + $0.30 the fee is $30.30 and $569.70 lands, so $14.60 less. Whether that matters depends on margin: at 40% gross on a $600 order, one extra sale in sixteen pays for the added cost on the other fifteen.

Frequently asked questions

Is BNPL more expensive than accepting a credit card?

Yes, and the gap is rarely small. Most BNPL providers charge several percent of the order plus a small fixed fee, commonly around double what a typical card sale costs you. That premium buys two things: a provider carrying the repayment risk and funding the instalment plan, and whatever conversion and basket-size lift the option brings you.

What happens if a BNPL customer stops paying?

You keep the money. The provider approved the shopper, so collection and any late fees are its problem, as is the loss if the debt is never recovered. That protection covers non-payment and nothing else. If the shopper disputes the order itself, for non-delivery or a faulty item, the provider refunds them and takes the amount back out of your account.

How do refunds work with buy now, pay later?

You refund through the BNPL provider rather than the card networks, and that cancels or reduces the shopper's remaining instalments. A partial refund usually shrinks the later payments instead of sending cash back, so a customer who has paid one instalment may see very little of it directly. Check whether your provider returns its transaction fee on a refunded order, because many keep it.