Sezzle Review: BNPL and Build Credit!
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Buy now, pay later services have been a game changer, offering flexibility to make big purchases and pay for them over time. These services break down the total cost of an item into smaller, more manageable payments, often with little to zero interest. While BNPL options provide convenience and accessibility to those who may not have the means to pay for large purchases upfront, they also come with potential risks, particularly for those who struggle to manage their finances effectively.
One significant aspect affected by BNPL services is an individual's credit score. Your credit score plays a crucial role in determining your financial health and ability to access credit. A good credit score can open doors to favorable loan terms, credit card approvals, and more, while a poor credit score can limit financial opportunities.
For those looking to improve their credit score, responsible financial habits such as making timely payments and managing debt are essential. However, traditional credit-building methods may not be accessible to everyone, especially those with limited credit history or past financial challenges.
Enter Sezzle – a BNPL service that not only allows you to split payments for purchases but also helps you build credit.
In this article
What is Sezzle?
Sezzle is a buy now pay later (BNPL) service that allows you to split purchases into four equal payments: one at the time of purchase and three more every two weeks. It functions as a free loan, with no interest or fees if payments are made on time. The company has partnered with several retailers.
Sezzle offers flexible payment plans to help customers manage their finances and build credit responsibly. They provide three main options:
- Pay in 2. Pay 50% at the time of purchase and the remaining 50% two weeks later, interest-free.
- Pay in four. Split the total purchase into four payments over six weeks, interest-free.
- Pay monthly. For larger purchases, payments can be spread over 3 to 48 months, subject to approval.
Sezzle performs a soft credit check when you apply, but your credit score is less critical to their decision than with traditional lenders. Additionally, Sezzle reports your payments to major credit bureaus after certain requirements are met, helping you build credit. For reference, timely payments are a major contributor to a credit report.
Sezzle payments are due every two weeks. If a payment is missed, Sezzle will deactivate your account, charge a $15 reinstatement fee, and report the late payment to credit bureaus.
How does Sezzle work?
Sezzle offers a payment plan where you pay 25% at purchase as a down payment and the remaining balance in three equal payments every two weeks, completing the loan in six weeks. There are no interest or fees if payments are made on time using free payment methods like ACH transfers via a bank account. Other payment methods incur a $5 fee per payment.
Sezzle sets individual spending limits, accessible by setting up ACH transfers, checking with merchants in the app, or upgrading to Sezzle Up. Credit limits increase with successful loan repayments.
To have payments reported to credit bureaus, you will have to upgrade to Sezzle Up for free by verifying your identity, setting up a default payment method, and paying off one loan on time. Additional upgrades include:
- Sezzle premium. A paid subscription offering more merchants, deals, rewards, and priority customer service.
- Sezzle rewards. Earn points per dollar spent with certain merchants, redeemable for future purchases.
- Sezzle pay-in-full. Allows single payments for purchases, earning rewards and building positive repayment history.
You can discover Sezzle as a payment option at checkout with a partner merchant, then follow the prompts to create an account, apply for a loan, agree to the terms, and set up payments. Alternatively, you can download the Sezzle app to access more features and view partner merchants proactively.
- Access up to $750 per pay period
- No interest, mandatory fees, or credit checks
- Over 15 million downloads and counting
How much does Sezzle cost?
Sezzle doesn’t charge for its BNPL service as long as you’re paying on time. But that doesn’t mean you’re off the hook completely:
- Sezzle charges a fee of up to $5 for payments made via credit card, debit card, or prepaid card. I’m extremely surprised to see Sezzle charge $5 extra for a payment method that has become the norm today.
- If your account is deactivated due to a missed payment, a $15 fee is required for reactivation.
- The first payment reschedule is free, but subsequent rescheduling incurs a $7.50 fee per adjustment.
Who is Sezzle best for?
Sezzle is ideal for people who:
- Prefer to split their purchases into manageable, interest-free payments.
- Want to build their credit history, as Sezzle reports payments to credit bureaus once certain requirements are met.
- Can reliably make payments on time to avoid fees.
- Appreciate flexible payment plans.
- Prefer using ACH transfers to avoid additional fees.
Who shouldn't use Sezzle?
Sezzle may not be suitable for people who:
- Struggle with making payments on time, as missed payments lead to account deactivation, a $15 reinstatement fee, and late payment reporting to credit bureaus.
- Primarily use credit cards, debit cards, or prepaid cards for payments, as these methods incur a $5 fee per transaction.
- Access up to $750 per pay period
- No interest, mandatory fees, or credit checks
- Over 15 million downloads and counting
Pros and cons
Pros
- Convenient payment structure. Sezzle allows users to split purchases into equal payments over six weeks, making it easier to afford big-ticket items without straining finances.
- Interest-free payments. There are no interest charges with Sezzle, as long as payments are made on time, providing a cost-effective alternative to traditional credit options.
- Credit building. Sezzle reports payments to credit bureaus, helping users build or improve their credit history over time.
Cons
- Potential fees. While Sezzle doesn't charge interest, there may be fees associated with certain payment methods or missed payments, impacting the overall cost of using the service.
- Account deactivation. Missing a payment with Sezzle can result in account deactivation until the payment is made, potentially causing inconvenience for users.
Sezzle vs competitors
Here’s how Sezzle stacks up against its competitors:
Klarna
Both Sezzle and Klarna offer interest-free payments if made on time. However, Klarna provides a broader range of financing options, including longer-term plans with potential interest charges.
Sezzle charges fees for card payments and late payments, while Klarna charges late fees for missed payments. In terms of credit impact, Sezzle can help build credit by reporting payments to credit bureaus, whereas Klarna does not help build credit, except for certain financing accounts that require a hard credit check. Sezzle offers more structured plans with defined payment schedules, while Klarna provides more flexible options, including "Pay in 30" and longer-term financing.
Overall, Sezzle is better suited for those focused on building credit and managing structured payments, whereas Klarna is ideal for individuals with immediate payment needs and less concern about building credit.
Afterpay
Both Sezzle and Afterpay offer interest-free payments if made on time. However, they differ in their fee structures.
Afterpay imposes late fees capped at $8 or 25% of the order, whereas Sezzle charges fees for card payments and late payments. In terms of credit impact, Sezzle stands out as it reports payments to credit bureaus, potentially aiding in credit building, while Afterpay does not report to credit bureaus.
Additionally, Afterpay provides a more flexible payment structure with four equal installments with the due date falling every two weeks over six weeks, catering to various financial situations. It can be used both online and in-store at partner merchants, offering convenience. On the other hand, Sezzle offers structured plans with defined payment schedules like "Pay in 2," "Pay in 4," and monthly payments, which may appeal to those seeking a more organized approach to managing payments.
Overall, Sezzle is suitable for individuals focused on building credit and managing structured payments, while Afterpay is ideal for those prioritizing quick approval and convenient payment options, albeit without credit-building benefits or for those uncertain about timely payments.
Splitit
Splitit differs from most buy-now-pay-later providers by allowing users to split purchases using their existing credit cards. With Splitit, select merchants charge a portion of the total payment to the user's credit card until it's repaid, typically over three months to two years, depending on the purchase price.
While Splitit itself doesn't charge interest or fees, users should be aware that their credit card may accrue interest if the balance isn't repaid on time. For individuals who prefer using their current credit cards over taking out a point-of-sale loan, Splitit offers a viable alternative to Sezzle.
- Access up to $750 per pay period
- No interest, mandatory fees, or credit checks
- Over 15 million downloads and counting
FAQs
What is Sezzle?
Sezzle is a buy now, pay later (BNPL) service that enables users to split their purchases into four equal payments over six weeks, with no interest or hidden fees.
How does Sezzle work?
When you make a purchase with Sezzle, you pay 25% of the total upfront and the remaining balance is spread across three payments, due every two weeks. As long as you make payments on time, there are no additional costs.
Is Sezzle available for online and in-store purchases?
Yes, Sezzle can be used for both online and in-store purchases at partner merchants.
Does Sezzle affect my credit score?
Yes, Sezzle reports payments to credit bureaus, which can help users build or improve their credit history over time.
Are there any fees associated with Sezzle?
Sezzle does not charge interest or fees for on-time payments. However, there may be fees for certain payment methods or late payments.
What happens if I miss a payment with Sezzle?
If you miss a payment, Sezzle may deactivate your account until the payment is made, and you may incur a reinstatement fee. Additionally, late payments may be reported to credit bureaus.
The bottom line
Sezzle offers a convenient buy now, pay later service with interest-free payments, flexible payment plans, and the potential to build credit by reporting to credit bureaus. One of Sezzle's notable advantages is its potential to help users build credit responsibly by reporting payments to credit bureaus, contributing to improved credit scores over time.
Sezzle offers various payment options, including "Pay in 2," "Pay in 4," and monthly payments, catering to different financial needs and preferences. While Sezzle does charge fees for certain payment methods and late payments, its transparent fee structure allows users to make informed decisions.
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Writer
Jasir Jawaid is Joy Wallet's Assistant Editor. He has more than 13 years of experience as a journalist covering Wall Street, equities, financial policy and regulation, and cryptocurrency and blockchain.
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