Also called: Afterpay, Installment payments, Pay in 4
What Buy Now, Pay Later is
Buy Now, Pay Later (BNPL) is a checkout payment option that lets a customer purchase now and repay in installments over weeks or months. It is also called installment payments. A Pay in 4 plan, for example, splits a $100 purchase into four $25 payments.
The customer chooses a plan at checkout and accepts its terms with the BNPL provider. In a common merchant arrangement, the provider pays your business upfront, minus its fee, then manages the customer’s installments and collections. Your business gets the sale proceeds sooner, but it does not receive the full purchase amount.
BNPL can bring in a sale, but the provider fee comes out of your margin first.
How BNPL works at checkout
BNPL appears alongside card and digital wallet options, most often in online checkout. Some offerings also support in-person purchases. A Pay in 4 schedule can require one payment at purchase, followed by three payments every two weeks. Other plans spread payments over several months, and financing terms depend on the provider and customer approval.
The provider sets the available plans, eligibility rules, and customer repayment terms. For example, a monthly plan can include interest, while a short-term Pay in 4 plan can be interest-free for the customer. Late fees or interest can apply under some customer agreements.
Example BNPL fee on a $100 sale
| Purchase amount | $100 |
|---|---|
| Listed fee example | 6% + $0.30 |
| Fee deducted | $6.30 |
| Payout before other charges | $93.70 |
The 6% + $0.30 rate is one listed fee example, not a standard BNPL price. Dollar totals are calculated from that rate.
What BNPL means for your costs
BNPL fees come from the provider’s merchant pricing, not a universal card-network rate. One listed US fee example, as reported in 2026, is 6% plus $0.30 per sale. At that rate, a $100 purchase costs $6.30 in fees before any other charges. The actual fee depends on the service and your merchant terms.
That expense can be higher than your card-processing cost and reduce the margin on each sale. Some BNPL arrangements use their own standard rates even when you have a custom card-processing rate. Compare the BNPL fee with the profit on the sale, not just the added revenue.
Where BNPL helps and where it costs you
Installments give customers another way to manage a larger purchase without paying the full amount at checkout. For a business selling higher-priced goods or services, BNPL can make the payment option fit the purchase. The tradeoff is the provider fee, which applies to the sale even if the customer pays the provider over time.
The provider’s terms also determine who handles missed installments, fraud-related disputes, refunds, and customer service. Some providers take on repayment and fraud-related risk, but protections are not uniform. Read the fee schedule and agreement for the exact merchant rate, refund treatment, and responsibility for disputes before enabling BNPL.
What you can actually change
- Compare the fees. Find the BNPL rate in your merchant pricing and compare its cost per sale with your card-processing fees and gross margin.
- Check the agreement. Look for payout timing, refund handling, dispute responsibility, and any separate fees. These terms affect your cash flow and the final cost.
- Measure the results. Track BNPL sales, average order value, fees, refunds, and repeat purchases separately. Keep the option only if the added sales justify its cost.
- Make it optional. Offer BNPL alongside other payment methods rather than making it the default. Customers should see the repayment terms before they select a plan.
Frequently asked questions
Does my business get paid upfront with BNPL?
In a common BNPL arrangement, the provider pays your business upfront, less its fee, and collects installments from the customer. Confirm payout timing and deductions in your merchant terms because arrangements differ.
How much does BNPL cost a merchant?
There is no single BNPL merchant rate. Fees depend on the provider and your terms. One listed US fee example, as reported in 2026, is 6% plus $0.30 per sale, or $6.30 on a $100 purchase.
Does BNPL cost the customer interest?
It depends on the plan. A short-term Pay in 4 option can be interest-free, while monthly financing can charge interest. Late fees or other charges can also apply under the customer’s agreement.
Can I turn off BNPL?
BNPL is an optional checkout payment method in the offerings described in the research. Check your payment settings for the option to disable it, and verify whether fees or other terms apply to completed transactions.