Apple's line of innovative consumer products has earned the tech giant a special place in the hearts of millions of fans, but now it's angling for a similar position in their wallets with the impending launch of its own Buy Now Pay Later (BNPL) service.
The company is now "inviting select users" to use Apple Pay Later, initially announced in June 2022, and the service will roll out to all eligible users in the coming months. The BNPL service offers the option to pay for purchases in four installments with no-interest, similar to popular providers such as Afterpay and Sezzle.
CNBC Select takes a closer look at the new BNPL product by Apple, compares it to similar services and no-interest finance options and evaluates who benefits the most from the latest entrant to the BNPL market.
How does Apple Pay Later work?
Apple Pay Later
Interest rates
0%
Loan terms
6 weeks
Fees
None
Return policy
If you return any part of your purchase and are eligible for a refund, the merchant will typically notify Apple Pay Later. The refund will be applied to the payments you owe on your loan. If the refund exceeds the remaining loan balance, it may take up to 5 days to appear on your debit card account.
Available merchants
Apple Pay is accepted at over 85% of retailers in the U.S.
Loan amounts
$50 to $1,000
Pros
- Doesn't charge any late fees
- Only a soft credit check required
- Doesn't charge any interest on purchases
Cons
- Only offers one short-term credit option so it's not a good option if you need a longer term
- Only invited users can currently use the service
Randomly selected Apple users can apply for a loan using their Apple Wallet app and divide a purchase into four equal payments. Applying only results in a soft credit check, meaning there won't be a hard inquiry to affect your credit.
Available loan amounts range from $50 to $1,000. The service spreads the amount over four interest-free installment payments: you'll make the first payment when you buy the item and pay off the rest over six weeks, with each payment due every two weeks.
If you have been invited to try Apple Pay Later, you can get started by applying for a loan in your Wallet app. You'll need to enter the amount you want to borrow and agree to the terms and conditions. At this point, Apple Financing will perform a soft credit pull to check if you qualify. Note that if your credit score is lower than 620, you might get rejected. If you're approved, you'll see the Pay Later option when you check out using Apple Pay online or the app at eligible retailers.
In your Wallet app, you can also keep track of how much you owe on all your Pay Later loans, as well as the total amount due in the next 30 days. Additionally, you can keep an eye on your upcoming payments in a calendar view. The app will send you a notification before payment is due and you'll also receive an email reminder.
To pay for your Apple Pay Later loan, you'll need to link a debit card to the service. Apple doesn't allow credit cards "to help prevent users from taking on more debt to pay back loans."
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Should you use Apple Pay Later?
Apple Pay Later is very similar to other BNPL services — particularly Afterpay, Zip and 'Pay in 4' with PayPal. All of these services only offer one loan option of four interest-free payments over six weeks. Apple Pay Later, however, doesn't charge any fees (Afterpay and Zip both charge late fees, and Zip also charges fees on each installment).
Another unique feature of Apple Pay Later is that it will report loan and payment history to credit bureaus, which could affect users' credit scores.
If you're an avid Apple user, the convenience of Apple Pay Later makes it an appealing choice. Yet that's where the risk of BNPL services lies: they tempt you to spend more than you can afford — and data shows that many BNPL users do.
Before you use Apple Pay Later or another similar service, consider why you want to take on this debt. If you can't afford a purchase now, will six weeks make a difference? Will you be able to make payments every two weeks without wreaking havoc on your budget? Remember that Apple Pay Later may report to the credit bureaus any late payments you make, causing your credit scores to drop. Payment history has a huge influence on your credit score, and late payments stay on your credit reports for seven years.
If you feel comfortable taking on the responsibility of a BNPL service, Apple Pay Later may be a good option for your purchase. But if the six-week schedule doesn't work for you, you could take some time to save up the needed money to make the purchase in full. This might not provide the same instant gratification but will allow you to avoid paying interest without getting on the BNPL debt hook.
Alternatively, if you have good credit (680 or higher), you might want to consider a 0% APR credit card. This type of card can offer you a promotional interest-free period for longer than a year. Plus, you may be able to earn cash-back rewards on your purchases. The key is to pay off the entire balance within the promo period to avoid expensive interest charges. CNBC Select has compiled a list of the best 0% intro APR cards and here are some of our top choices:
Wells Fargo Reflect® Card
Rewards
None
Welcome bonus
None
Annual fee
$0
Intro APR
0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.
Regular APR
18.24%, 24.74%, or 29.99% Variable APR on purchases and balance transfers
Balance transfer fee
5%, min: $5
Foreign transaction fee
3%
Credit needed
Excellent/Good
See rates and fees. Terms apply.
Chase Freedom Unlimited®
Rewards
Enjoy 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery services, 6.5% cash back on travel purchased through Chase Travel, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; and 3% cash back on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases.
Welcome bonus
INTRO OFFER: Earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back!
Annual fee
$0
Intro APR
0% for the first 15 months from account opening on purchases and balance transfers
Regular APR
20.49% - 29.24% variable
Balance transfer fee
Intro fee of either $5 or 3% of the amount of each transfer, whichever is greater, on transfers made within 60 days of account opening. After that, either $5 or 5% of the amount of each transfer, whichever is greater.
Foreign transaction fee
3%
Credit needed
Excellent/Good
Member FDIC. Terms apply.
Read our Chase Freedom Unlimited® review.
Bottom line
Apple Pay Later may be a solid BNPL option for Apple users, thanks to its convenience and lack of fees. But just like with any other BNPL service, you need to make sure you understand the terms and can pay off the debt as agreed. This will be especially important once the lender will begin reporting Apple Pay Later loans and payments to credit bureaus.
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