Here’s a comparison of the six major BNPL services—Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip—to help you decide which might best suit your needs.
1. Key Similarities
- Interest-Free Loans: All services offer pay-in-four loans at 0% interest.
- No Credit Impact for Approval: Applications won’t affect your credit score.
- Overspending Risk: Easy access can tempt users to overspend, with 45% of BNPL users reporting purchases they otherwise couldn’t afford.
- Limited Regulation: Little oversight, though the Consumer Financial Protection Bureau (CFPB) is investigating these services.
2. Repayment Flexibility and Late Fees
| Service | Late Fees | Payment Flexibility |
|------------|-----------|---------------------|
| Affirm | No | Hardship assistance available. |
| Afterpay | Yes ($8 cap) | Rescheduling allowed. |
| Klarna | Yes (up to $7) | Flexible payment extensions available. |
| PayPal | No | No extensions offered. |
| Sezzle | Yes ($10 cap) | Payment dates can be rescheduled for free once per order. |
| Zip | Yes ($7) | Offers extensions with conditions. |
3. Grace Periods
- Afterpay and Klarna: 10-day grace periods.
- PayPal: 3-day grace period.
- Sezzle: 2-day grace period.
- Affirm and Zip: No grace periods.
4. Impact on Credit Scores
- Sezzle: Offers the SezzleUp program to build credit by reporting on-time payments. Late payments may also be reported.
- Other Services: Don’t report payments to credit bureaus but may send unpaid debt to collections.
- Affirm: Sends accounts to collections after 120 days of nonpayment.
- Others: May turn unpaid accounts over to collections but are less transparent about when.
5. Assistance With Purchase Disputes
| Service | Refund/Exchange Help |
|------------|-----------------------------|
| PayPal | Offers purchase protection, similar to credit cards, with full reimbursement for approved disputes. |
| Sezzle & Affirm | Mediate disputes between you and the merchant. |
| Afterpay & Klarna | Temporarily halt payments during a dispute but won’t mediate with the seller. |
Pros and Cons by Service
Affirm
- Pros: No late fees, hardship options available.
- Cons: No payment extensions; unpaid accounts sent to collections after 120 days.
Afterpay
- Pros: 10-day grace period, payment rescheduling.
- Cons: $8 late fee cap applies; doesn’t mediate disputes.
Klarna
- Pros: 10-day grace period, flexible payment extensions.
- Cons: $7 late fee, limited dispute support.
PayPal
- Pros: No late fees, purchase protection similar to credit cards.
- Cons: No payment flexibility; 3-day grace period only.
Sezzle
- Pros: SezzleUp builds credit, flexible payment scheduling.
- Cons: Late fees up to $10; credit score could be hurt by late payments.
Zip
- Pros: Payment extensions available on request.
- Cons: $7 late fee; no grace period.
Tips for Smart BNPL Use
- Know Your Budget: Avoid BNPL if you can’t afford the purchase outright.
- Understand Terms: Be clear on late fees, grace periods, and repayment options.
- Track Payments: Missed payments can lead to fees or collections.
- Watch Your Credit: Services like Sezzle may affect your score, so use them wisely.
By understanding the differences, you can choose a BNPL service that aligns with your financial habits while minimizing risks.
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