How Does Affirm Work and Is It Safe? An Expert Weighs In

If you've spent any time shopping online recently (who, me?), you've probably noticed something new at checkout. Aside from having to input your email, phone number, social security number, blood type, and the name of your first-born son, there's often a new prompt asking you if you'd like to split up the payment of your purchase over the course of some amount of time, usually a few months. These Buy Now Pay Later (BNPL) services like Affirm, Klarna, and Afterpay have cropped up in virtual carts everywhere since the pandemic, which forced the world to transition all its shopping to the internet.

But the truth about BNPL services is more complicated: Sure, their appeal has never been stronger, especially at a time when household costs are skyrocketing, and basics like food prices are draining budgets from Montana to Mississippi. But consumer debt is also at an all-time high, making BNPL services a little more treacherous for those of us who have a tendency to rack up dues.

How does Affirm work, or any of the other popular BNPLs? The services allow consumers to make purchases online and pay the balance in installments over time. If they sound too good to be true, entrepreneur and finance professor Neha Kumar says for some people they are. BNPL services can be dangerous for those who are budget-challenged or who already have a lot of debt, she tells PS. (More Americans than ever are struggling to pay off loans and credit cards — the total household debt in the US is hovering around $18 trillion — so if that's you, you're definitely not alone.)

On one hand, BNPL services "provide consumers with flexibility and accessibility, which can be empowering," Kumar says. "On the other hand, the potential for misuse and the risk of accumulating debt are valid concerns."

Here's what to consider before you go all in on what Kumar calls the "double-edged sword" of Affirm and other BNPL services.

Neha Kumar is a lecturer at UCLA's Anderson School of Management, an investment coach at the Women's Abundance Collective, and the founder of Full Glass Wine Co.

Whether you're looking to invest in an expensive new gadget, a luxe new piece of furniture, or a $40 dog statue in a Santa hat, Affirm and services like it allow you to break up your payments so they're not such big blows to your bank account.

"The primary value of BNPL is flexibility," Kumar explains. "It allows consumers to spread payments over time, making larger purchases more manageable. This can be particularly helpful for essential items or emergencies."

Some BNPLs offer desirable perks like zero percent interest rates and no late fees, and they can be convenient in a pinch when you don't have the cash on hand. But according to CNBC, Affirm's interest rates can range up to 30 percent, and less than half of Affirm loans come with zero percent interest. Because of the variability between providers and loan types, Kumar emphasizes that BNPL services like Affirm aren't necessarily the best choice for every kind of consumer, especially those who don't like to comb through the fine print.

"It's vital to weigh [the pros] against the potential for accumulating debt and the importance of maintaining a budget," she says. Otherwise BNPL services can make it a little too easy for you to slide quickly into financial trouble.

While Affirm doesn't charge late fees like a credit card company, late payments on a BNPL service can still negatively impact your credit rating the same way late credit card payments can. "So it's essential to stay on top of your repayment schedule to maintain your financial standing," Kumar cautions.

Overall, though, Kumar explains that typically, the fee structure of a BNPL is more transparent than credit cards.

"BNPL services typically offer fixed payment plans with set terms, which can provide clarity and structure compared to credit cards that may have revolving balances and fluctuating interest rates," she says. "Additionally, BNPL services often do not involve interest if paid on time, whereas credit cards can accrue high interest if balances are not paid in full each month."

BNPL services aren't inherently scammy, Kumar says, but not all are created equal. "Some companies are transparent and provide clear terms, making them worthwhile for consumers who need flexibility," she says. But there still may be others with hidden fees or unfavorable terms that can lead to financial strain.

"It's crucial to do your research and understand the specific service before using it," Kumar says.

A BNPL service like Affirm, Klarna, or Afterpay is not any less safe than other online purchasing platforms, credit cards, or loans. But whether they're a good option for your online shopping will really depend on your personality, shopping habits, and financial goals.

Ultimately, you should treat a BNPL service like any other financial provider. "It's important to assess your own financial situation — make sure you can afford the payments without compromising your budget," Kumar says.

Emma Glassman-Hughes (she/her) is the associate editor at PS Balance. In her seven years as a reporter, her beats have spanned the lifestyle spectrum; she's covered arts and culture for The Boston Globe, sex and relationships for Cosmopolitan, and food, climate, and farming for Ambrook Research.