Bread partners with dozens of online retailers to offer transparent payment plans to shoppers at the time of purchase. Here’s everything you need to know about how the service works.
While the concept of “buy now, pay later” is nothing new, such services have since become ubiquitous as more and more online retailers (and, in some cases, brick-and-mortar merchants) provide point-of-sale financing options for customers.
One of the lesser-known (but growing) fintech companies that work with businesses to offer these payment plans is Bread. If breaking down your next big purchase into more manageable payments sounds like it could be a good fit for your budget, keep reading to learn more about how Bread works so you can decide whether it’s right for you.
Paying over time with Bread
What is Bread?
Founded in 2014, Bread is a payment platform that offers fast and easy financing at dozens of online stores. Whether you’re shopping for a big-ticket item like a new appliance or just don’t want to wait until payday to replace your broken headphones, you can choose from two types of payment plans (depending on the retailer):
- SplitPay: The appropriately named SplitPay service divides your order total into four interest-free payments spread out over six weeks.
- Installments: For more expensive purchases that require a longer payoff period, you can apply for a three- to 48-month installment loan with fixed payments and an interest rate as low as 0% (for those who qualify).
For some shoppers, Bread can be a more cost-effective alternative to credit cards, especially store cards that often have sky-high interest rates regardless of the applicant’s credit history. That doesn’t mean it’s right for everyone, though, and like other types of financing, you should weigh the pros and cons before you sign on the (virtual) dotted line.
How Bread works
You need to meet a few basic requirements if you want to buy something using Bread:
- You’re a legal resident of the U.S. and at least 18 years old (19, if you live in Alabama or Nebraska).
- You have a valid, unexpired credit or debit card with “sufficient capacity” as determined by Bread. (This likely means you need to have enough available credit or money in your linked bank account to demonstrate an ability to repay what you borrow.)
- You must pass Bread’s fraud prevention checks.
- Bread must be able to verify your identity.
Bread’s customizable payment solutions are built right into the websites of its retail partners. Businesses can pick which financing plans and terms to offer, so your options and experience can vary depending on where you shop. You may be able to apply for financing at checkout, on a product or category page and/or in your cart.
Bread doesn’t provide a list of participating retailers on its website, but if you’re shopping at an online store that offers one or both financing options, the application process is pretty straightforward. We’ll use Noémie, a jewelry store that partners with Bread, as an example.
You can apply for financing basically anywhere on the Noémie website, as each page features a blue-and-white “view financing options” button in the bottom-left corner:
We also saw the option to apply for financing in-cart. (Again, your experience could be different at other retailers.)
If you decide to check your rate, you’ll be asked for some basic information (name, email and phone number). The prequalification process results in a soft pull of your credit report, so your credit score won’t be impacted. And unlike some other alternative payment solutions, everything takes place on the retailer’s website – you won’t be redirected to Bread or the underwriting bank to continue your application.
Once you submit your mobile number, you’ll receive a four-digit token via text to verify your identity.
Next, you’ll provide your address, birthday and last four digits of your Social Security number to get your personalized loan offers. It usually takes just seconds to receive a decision.
If you’re approved for a financing plan, you’ll see a screen detailing the payment terms offered by the merchant.
To move forward with financing, select “pay over time” as your payment method at checkout. Noémie doesn’t offer Bread’s SplitPay service, but when you’re shopping at a store that does, those payment amounts will be shown with your installment loan options.
With SplitPay, the total cost of your order is split into four equal payments, and the first one is due at the time of purchase. The rest are automatically billed to your chosen payment card every two weeks until your purchase is paid off.
Depending on the retailer, your installment loan offers may have repayment terms between three and 48 months, with APRs between 0% and 29.99% based on your creditworthiness. Your first payment is generally due about 30 days later, with monthly recurring payments on the same day for the remainder of your loan term.
You can make payments by check, debit card or automatic bill pay through your bank; you also have the option to set up autopay in the Bread member portal. At any time, you can choose to pay off your loan early or make higher monthly payments with no penalty, which lowers your overall interest charges and saves you money over time.
Pros and cons of paying with Bread
While Bread can be a fast and convenient payment option, that doesn’t mean it’s right for everyone. Here are some of the pros and cons of using the service:
- SplitPay allows you to pay for your purchases over time without accruing interest or fees.
- Traditional installment loans with fixed monthly payments offer predictability for your budget.
- You can check your rate and prequalify for installment financing without impacting your credit score.
- Installment loans are reported to TransUnion, which can help you build credit if you maintain a positive payment history.
- Automatic email and text reminders four business days before your due date help you stay on top of your Bread payments.
- Bread has a limited number of retail partners compared with other pay-over-time services, some of which (like QuadPay and Klarna) can be used anywhere.
- There’s no comprehensive list of participating stores on Bread’s website, which can make it hard to plan ahead for your purchases.
- SplitPay isn’t reported to the credit bureaus, so using it won’t help you build credit.
- Late installment payments – which are reported to TransUnion – incur a $10 fee and can hurt your credit score.
- The APR on your loan could be as high as 29.99%, much higher than the average credit card interest rate of about 16%.
- Returning or canceling a purchase can be complicated, and you might still be on the hook for restocking fees and accrued interest on your installment loan.
Tips for maximizing Bread
If you decide to take advantage of Bread’s SplitPay or installment loan options, keep the following tips in mind to make the most of your financing.
Don’t borrow more than you can afford to pay off
In our Noémie example, we qualified for an installment loan of up to $2,500 for an item that cost $390. If you’re approved for more financing than you need to complete your purchase, that doesn’t mean you should buy more stuff to max out your available credit.
Pay attention to the interest rate
Many “buy now, pay later” solutions are touted as being interest-free. That’s true of SplitPay, but Bread installment loans do charge interest (and in some cases, a lot of it). Review your terms and conditions carefully so you aren’t surprised later.
Set up autopay
Bread sends helpful text and email reminders four days prior to each due date, but if you want to eliminate the potential for late or missed payments altogether, enroll in autopay through the Bread member portal.
Take advantage of penalty-free prepayment
Because the APR on a Bread installment loan can be as high as 29.99%, make bigger monthly payments any time you have some extra room in your budget. This won’t decrease your monthly loan payment, but it will save you money in overall interest charges.
Bread partners with dozens of online retailers to offer transparent payment plans to shoppers at the time of purchase. In some cases, paying with Bread can be cheaper than paying with a credit card, especially if you’re new to credit or have limited access to traditional lenders.
That said, Bread won’t always be the best or most affordable way for you to pay, so take a close look at the interest rate you’re offered (and the other terms of the loan) to make sure you’re getting a good deal. And if you can, opt for SplitPay to avoid paying any interest at all.