Weighing Buy Now Pay Later vs. Credit Cards

weighing buy now pay later vs credit cards

What’s better – Buy Now Pay Later or credit cards?

The holiday season might have you considering Buy Now, Pay Later (BNPL) services. They can be a good option, from the zero interest rate to the spread-out payment plans. However, are BNPLs better than simply using your credit card? Let’s take a look.

Buy Now Pluses

BNPLs have a few good things going for them. For one, you can get an expensive product even if you don’t have the cash on hand at that moment. They also allow you to spread out payments over time, making it easy to fit a pricey item into your budget. BNPLs also don’t charge interest, so that’s one less thing to worry about.

Buy Now Minuses

Despite the benefits of BNPLs, there are several drawbacks:

  • You are charged fees if you miss a payment.
  • These services aren’t regulated like credit cards.
  • You may get approved for a BNPL loan when you wouldn’t normally qualify for traditional financing.
  • BNPLs can offer you multiple loans at one time, something known as “loan stacking,” which can increase the odds of missing payments and incur fees.

A recent report on BNPL found that between 30 and 50 percent of people who have used the service ended up regretting the purchase.

Credit Cards are Preferred

Ultimately, you should use a credit card instead of BNPL. The biggest reason, as Marketwatch points out, is that using a credit card builds your credit while using a BNPL doesn’t. If you use your card and make on-time payments, you’ll improve your credit score. You’ll get no such benefit from making timely BNPL payments.

When in doubt, avoid Buy Now Pay Later options and use your credit card.

Chris O'Shea