Costco Partners with Affirm for Interest-Charging BNPL Plans

Costco has recently partnered with Affirm to introduce Buy Now, Pay Later (BNPL) plans for online purchases ranging from $500 to $17,500. This new financing option allows customers to split payments over 3 to 36 months, but unlike many BNPL plans that offer interest-free installments, Affirm charges interest rates between 10% and 36% APR.

The interest charged by Affirm is simple interest, meaning it accrues only on the principal balance each month, rather than compounding. This can make the cost more predictable compared to credit cards, which typically charge compounding interest that accumulates on both principal and accrued interest.

To use Affirm at Costco, customers select it as a payment option during online checkout and complete a soft credit check that does not affect their credit score. Approval requires submitting identification, a photo, income details, and the last four digits of the Social Security number. Customers then choose from offered payment plans, each displaying monthly payments and total interest costs.

Examples illustrate how interest accumulates over different repayment periods. For instance, a $2,500 couch financed over 12 months at a 7.99% APR results in about $124 in interest, increasing the total cost beyond the original price. Longer repayment terms increase interest paid, sometimes significantly.

While BNPL can help manage large purchases by breaking payments into smaller chunks, it does not save money overall due to interest charges. Customers should consider whether the convenience outweighs the additional cost or if alternatives like credit cards with 0% introductory APR might be better—though these come with their own risks and credit checks.

Importantly, Affirm reports payment activity to major credit bureaus, which means timely payments can positively impact credit scores, while missed payments can harm them. The effect varies depending on the credit scoring model used.

In summary, Costco’s Affirm BNPL plans offer flexible financing but with interest costs that can add up. Shoppers should carefully review payment terms, interest rates, and their own financial situation before committing. Using BNPL responsibly can help manage cash flow, but it’s not a free or interest-free option.