Now PayPal boards the ‘Buy Now Pay Later’ train with ‘Pay in 4’ service

• The service is an expansion on PayPal’s existing lineup of Pay Later solutions, which also includes PayPal Credit’s revolving credit line and its Easy Payments
• With Pay in 4, customers can choose to pay for purchases between US$30 and US$600 over a six-week period

As more customers have turned to e-commerce amidst the pandemic, point-of-sale installment loan fintech has grown in popularity and value over the past few months. The boom of Buy Now Pay Later (BNPL) retail financing has in fact prompted renowned players like PayPal to launch their own versions for users called “Pay in 4.” 

The name speaks for itself  — providing customers with the ability to pay for purchases, interest-free, over four separate payments. The service is an expansion on PayPal’s existing lineup of Pay Later solutions, which also includes PayPal Credit’s revolving credit line and its Easy Payments. To briefly put, BNPL services allow customers to break up an online purchase into a series of payments that can be paid over time. In 2020, BNPL facilitated between US$20 billion to US$25 billion in transaction value in the US alone, according to management consultants Oliver Wyman.

BNPL doesn’t charge ongoing interest like a credit card, but it does charge you late penalties and transaction fees for some. Notably, while BNPL companies don’t charge you interest at first, some of them will begin doing so once you get behind on your payments. PayPal, as a matter of fact, does not. The services so far are only available in the US.

“Four interest-free payments”

It is pretty simple to use; when you’re at a retail site’s checkout page, look for the usual PayPal or ‘pay later’ button as a payment option. Provided that you already have a PayPal account that’s linked to a debit or credit card, toggling that button will take you to a payment screen. On the screen, users should see a “pay later” option that includes “Pay in 4.”

At this point, PayPal will have run a soft credit check, and it will not hurt your credit score – you will either just be approved or denied for the transaction. If you’re approved, then a payment summary will appear. For example, “four interest-free payments of US$31.25 due every two weeks, starting today” which you can accept by toggling the option and then selecting “continue” at the bottom of the screen.

If you’re using a debit card, these funds will be drawn automatically when they’re due but if your PayPal is linked to a credit card, you can set up automatic payments immediately after you buy anything on an installment plan.

PayPal Pay in 4 vs. PayPal Credit

If you’re making a pricier purchase, like a plane ticket or other big-ticket purchases, PayPal Credit is likely a better option. You’ll get a reusable credit line and have six months to pay off purchases of US $99 or more. You won’t pay interest if you make your payments on time with PayPal Credit. However, interest will be charged to your account if you’re late. The APR for new accounts is 23.99% and late fees are up to US$40.

While we can’t find mention of whether late payments impact your credit score, it’s possible that your credit score could be affected either negatively or positively based on the timeliness of your payments