Everything You Need to Know About Amazon’s Buy Now, Pay Later Program
Amazon offers a buy now, pay later plan that may seem appealing, but opting into it may not be the best financial decision.
Contributing Writer at Tally
August 26, 2022
When you’re shopping on Amazon, you may be presented with a buy now, pay later option known as AmazonMonthly Payment. This plan is only available with select vendors. By choosing this payment option, you agree to receive the product upfront and then pay the cost of the product in a series of installments.
In this article, we’ll outline everything you need to know about the Amazon buy now, pay later program. Specifically, we’ll cover what it is, how it works, and whether there are other options available. We’ll also touch on whether using buy now, pay later plans is a smart financial decision.
What is the Amazon buy now, pay later program?
The Amazon buy now, pay later (BNPL) program is an installment plan formally known as AmazonMonthly Payments. AmazonMonthly Payments is only available on select items. If an item is available for the payment plan, there will be an option at checkout.
With the BNPL program, you pay for a portion of your purchase upfront. Then, you pay off the remainder of the balance via monthly installment payments.
There are a few eligibility restrictions tied to the program, including:
You have an Amazon account that has been active for one year.
You have a positive payment history.
You have a valid, active credit card tied to your Amazon account. You can’t use a debit card.
You reside in the United States.
Now that you have a better idea of what the Amazon buy now, pay later plan is, let’s take a closer look at how it works.
How does the Amazon BNPL plan work?
When you choose the AmazonBNPL plan, the cost of an item is split across five separate, interest-free payments. You’ll pay 20% of the cost upfront and receive the item. Then, you’ll make the remaining payments — equal to 20% of the cost — in monthly installments over the next four months.
However, it’s worth emphasizing that Amazon is merely charging your credit card for the purchase. You’ll still need to make your credit card payments on time and in full if you wish to avoid the impact of compounding interest. When interest compounds, your interest charges are added to your balance. Your new interest charge is based on this new balance. Essentially, you are charged interest on top of interest.
While Amazon does not perform a credit check when you use its Monthly Payments program — meaning that your credit score is not impacted by a hard inquiry — it’s unclear if a missed BNPL payment would impact your credit score. And since you have a credit card on file, you would miss an Amazon payment if your credit card became inactive or was declined.
It’s unclear if there are any late or hidden fees associated with a missed payment, but Amazon reserves the right to pursue any remedy available to recoup a missed payment. The company can suspend or terminate your account, as well as deregister any Amazon-specific devices, like a Kindle or Echo, that you purchased using the plan.
Are there other buy now, pay later programs available?
Additionally, there are third-party vendors who offer BNPL services, such as:
Before using any of these services, it’s important that you understand what you’re signing up for. While signing up for an Amazon buy now, pay later program does not require a credit check or interest fees, other lenders may. It’s easy to be tempted to get something off your wishlist now and make payments over the coming months, but it may not be the best financial decision.
Are BNPL plans a good idea?
Buy now, pay later programs have grown in popularity because of their convenience. However, they often give people an opportunity to make purchases they can’t afford because the initial payment is just a fraction of the cost. That can make expensive items seem more affordable, but you’ll still have to pay the entire price, and interest and missed payment fees might result in you spending even more.
The Consumer Financial Protection Bureau recently began an investigation into BNPL programs. The bureau’s director, Rohi Chopra, said in a statement, “Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too. We have ordered Affirm, Afterpay, Klarna, PayPal, and Zip to submit information so that we can report to the public about industry practices and risks.”
It’s important to understand the terms and conditions that come with installment programs like Amazon buy now, pay later, and the impact they may have on your personal finances. For instance, although the terms and conditions vary from one lender to another, a missed payment could cause damage to your credit score, or leave you with penalty APRs and late fees.
If you can avoid using BNPL programs, it may be in your best interest to do so. This requires proper financial management techniques, such as:
Taking time to create a budget.
Making sure you have enough cash for a large purchase.
Creating a savings account to help set aside money over time.
BNPL programs are extremely popular around holidays or events like Amazon Prime Day, when people are splurging on gifts. Instead of using Amazon buy now, pay later to pay in monthly installments, start planning in advance for special purchases. When the time comes, you can use a debit card or pay in cash so you don’t overspend.
Should you decide to put a large purchase on a credit card, make sure that you have enough money to pay your monthly statement on time and in full. If you’re not able to do so, your lender will charge you compounding interest.
Smart shopping without the Amazon BNPL plan
If you’re shopping online, you may be tempted to pay for your purchase by using an installment plan. Specifically, if you’re an Amazon customer, you may want to use the Amazon buy now, pay later plan at checkout. The Amazon buy now, pay later program allows you to purchase specific products by paying 20% upfront and then paying the remaining balance in 20% installments over the next four months.
While the plan is convenient, it’s important that you have your finances in order before choosing this type of payment method. Too often, buyers make a larger purchase than they can afford, only to struggle to pay in monthly installments down the road. You may also have to deal with late fees if you miss a payment on your credit card.
Instead of using the Amazon buy now, pay later installment plan, you should focus on crafting a good budget and only making purchases that are within your means. If you need help managing your monthly due dates and paying down your existing credit card debt, be sure to consider Tally†. Tally is an app designed specifically to help you pay off your credit card debts quickly and efficiently.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.