Apple’s ‘buy now, pay later’ feature is rolling out: Here’s how it works

Last June, Apple announced its foray into the very active “buy now, pay later” (BNPL) market with a feature called Apple Pay Later. Originally, it was expected to launch with the iOS16 update in September, though it was delayed.

The good news? It’s now available to randomly-selected users and will roll out to all eligible users in the coming months. The bad news? Buy now, pay later services do not allow you to earn points and miles on your purchase and can get you into trouble if you miss payments.

With that in mind, let’s take a look at what this feature is and how it works.

What is Apple Pay Later?

Apple Pay Later is Apple’s version of “buy now, pay later.” This allows you to make separate, equal payments for purchases, instead of paying all at once.

Rather than making a large purchase on your credit card and paying it off over time — which can mean paying interest — “buy now, pay later” features allow the ability to make multiple payments over time without paying interest.

Typically, these services offer a set number of payments over a series of months available without fees or interest. However, those additional charges can creep in if you go beyond the included terms or miss payments.

How does Apple Pay Later work?

This feature allows you to make four payments for a purchase, split into equal amounts. You can take out a loan between $50 to $1,000 “anywhere that Apple Pay is accepted, in apps or online.” It is not, however, available for in-store purchases.

Each payment occurs every two weeks and is scheduled automatically in your Apple Pay wallet. Thus, you don’t have to worry about forgetting to make your payments.

There are no fees or interest with Apple Pay Later.

The first payment with Apple Pay Later is due at the time of purchase, and then the remaining three payments are paid every two weeks — a total of six weeks from the purchase date. You can make the remaining payments early if you wish.

Apple Pay (as well as Apple Pay Later) isn’t limited to paying with Apple Cash or your Apple Card. While you can add most credit cards to your iPhone wallet, you’ll need to link a debit card as your repayment method when setting up a loan with Apple Pay Later.

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The Wallet app helps you manage your scheduled payments and outstanding balances. It also integrates into your Calendar app.

Auto-pay is the default setting, but you can turn off this feature if you can’t make your payment on time. When signing up for a new Apple Pay Later transaction, you’ll be able to see all your upcoming payments (from other loans) that are due within 30 days.

Note that the eligibility check requires a soft credit pull, but it won’t affect your credit score (or count toward Chase’s 5/24 rule), like signing up for a new credit card would.

Understanding how Apple Pay Later works is just one side of the equation. You should also understand how “buy now, pay later” options can lead to missing out on valuable credit card rewards. You want to ensure you don’t leave valuable points and miles on the table when choosing your payment method.

Merchants who already accept Apple Pay won’t need to do anything differently to accept Apple Pay Later. Apple leverages the MasterCard installments program as the payment technology to process each Apple Pay Later purchase.

The credit assessment, decision and lending are managed through a wholly-owned subsidiary of Apple called Apple Financing LLC, which maintains the appropriate state lending licenses.

Bottom line

The ability to buy now and pay later is becoming increasingly popular.

Its main selling point is making equal payments over time without interest. However, you should always make sure to use these features responsibly and not accrue debt simply because you can pay it off over time or because the payments lack the weighty interest assessed on a credit card. Also, know that not all of these services function the same and you may end up trading away credit card points or protections in some cases.

Apple Pay Later might be a handy feature to make payments over time. Just make sure you are approaching it responsibly since our top rule in points and miles is to always pay your bills in full and on time.

Additional reporting Zach Griff and Matt Moffitt. Featured photo courtesy of Apple.