Buy Now, Pay Later vs. Credit Cards: Which Is Right for You?

Guides Buy Now, Pay Later vs. Credit Cards: Which Is Right for You?

To the point Compare Buy Now, Pay Later vs credit cards: BNPL offers fixed, interest-free payments while cards provide rewards, build credit, and offer wider acceptance.

With the rise of Buy Now, Pay Later (BNPL) services like Affirm, Afterpay, and Klarna, consumers now have more financing options than ever before. While credit cards have long been the go-to payment method for spreading costs over time, BNPL has gained significant traction, particularly during the pandemic. According to research by C+R Research, 51% of consumers used BNPL services during COVID-19, and 38% of BNPL users believe these services will eventually replace their credit cards.

But which option is better for your financial situation? The answer depends on what kind of flexibility you need, how much either option will cost you, and whether you’re looking for predictability or rewards. Let’s compare these two financing methods to help you make an informed decision.

Feature	Buy Now, Pay Later	Credit Cards
Payment Structure	Fixed installments (typically 4 payments over 6 weeks)	Revolving credit with minimum monthly payments
Interest & Fees	Often interest-free for short-term plans; may charge late fees	High interest rates if balance isn’t paid in full; various fees possible
Credit Check	Usually soft inquiry or no credit check	Hard credit check required for application
Rewards	Rarely offers rewards or cashback	Often provides cashback, points, or miles
Credit Building	Limited reporting to credit bureaus	Regular reporting to credit bureaus
Purchase Protection	Limited or no additional protections	Often includes extended warranties, purchase protection, etc.
Availability	Limited to participating retailers	Widely accepted at most merchants

Payment Flexibility: Fixed vs. Variable

One of the main differences between BNPL and credit cards is how payments are structured.

Buy Now, Pay Later

BNPL services typically offer predictable payment schedules:

Most common format is “Pay in 4” — four equal payments over six weeks with the first payment due at purchase
Some services offer longer-term options (3, 6, or 12 months)
Fixed payment amounts that don’t change
Clear end date when the purchase will be paid off

“People feel they have more control over their payments with BNPL,” says Casey Merolla, a managing director in Accenture’s payments group. “It’s a finite purchase and not revolving or open-ended. Then, you pay it off and it’s over. That helps people control their spending a little more.”

Credit Cards

Credit cards offer more flexibility but less predictability:

Revolving credit line that can be used for multiple purchases
Minimum monthly payments that can vary based on your balance
Option to pay any amount above the minimum, up to the full balance
No fixed end date for paying off purchases
Some cards now offer BNPL-like features (e.g., Amex’s Plan It, Chase’s My Chase Plan)

The flexibility of credit cards means you can use them almost anywhere for almost anything, unlike BNPL which is typically limited to specific retailers.

Cost Comparison: Interest and Fees

Buy Now, Pay Later

BNPL services often advertise zero interest, but the terms vary:

Short-term “Pay in 4” plans are typically interest-free
Longer-term financing (3+ months) may carry interest rates similar to credit cards
Late fees usually range from $7-$10 per missed payment
No annual fees
Terms are clearly displayed upfront, showing exactly what you’ll pay

“They have either a fixed cost or no cost and are very upfront about showing you how much it will cost,” says Ginger Schmeltzer, a senior analyst for Aite Group’s retail banking and payments practice. “People like the predictability of it.”

Credit Cards

Credit cards can be either free to use or quite expensive, depending on how you use them:

No interest if you pay your balance in full each month
High interest rates (typically 18-25% APR) on carried balances
Potential annual fees ranging from $0-$695+
Late payment fees (typically $25-$40)
Some cards offer 0% intro APR periods, usually lasting 12-18 months

The key advantage of credit cards is that they can be completely free if you pay in full each month, while still providing rewards and benefits.

A man smiling while checking his phone, with a woman sitting on the couch in the background

Credit Impact: Building vs. Bypassing

Buy Now, Pay Later

BNPL services have historically had a limited impact on your credit:

Most providers perform a soft credit check or no check at all
Many don’t report on-time payments to credit bureaus
Some report negative information if you miss payments
Credit reporting from BNPL companies is still evolving
Multiple BNPL loans could potentially be viewed as multiple new accounts, affecting your credit score

This limited credit reporting can be both an advantage and a disadvantage. It makes BNPL more accessible to those with limited or poor credit, but it also means responsible use typically won’t help build your credit history.

Credit Cards

Credit cards have a well-established relationship with credit reporting:

Application requires a hard credit check (temporarily lowers your score)
Regular reporting of payment history to all three major credit bureaus
On-time payments help build credit history
Credit utilization (percentage of available credit used) impacts your score
Length of credit history is a factor in credit scoring

If building credit is a priority, credit cards offer a clear advantage over most BNPL options.

Rewards and Benefits: Perks vs. Simplicity

Buy Now, Pay Later

BNPL services typically focus on simplicity rather than rewards:

Few or no rewards programs
Limited purchase protections
No travel benefits or insurance
Main benefit is interest-free financing
Some services may offer occasional promotions with specific retailers

Credit Cards

Credit cards often come with substantial rewards and protections:

Cash back, points, or miles on purchases (typically 1-5%)
Welcome bonuses worth hundreds of dollars
Purchase protection and extended warranties
Travel insurance and rental car coverage
Additional perks like airport lounge access, statement credits, etc.

If you’re looking to maximize value from your spending, credit cards offer significant advantages through their rewards programs and additional benefits.

When to Choose Buy Now, Pay Later

BNPL might be the better option when:

You need predictable payments: If you want to know exactly how much you’ll pay and when you’ll be debt-free
You want interest-free financing: For short-term needs without the risk of revolving debt
You have limited credit history: When you might not qualify for a credit card with good terms
You’re making a specific large purchase: When you need to spread out the cost of a single item
You want to avoid a credit check: When you don’t want a hard inquiry on your credit report

“BNPL can be helpful for short-term budgeting, particularly if you can’t get approved for a good credit card,” notes Collin Czarnecki of C+R Research. “But it’s important to keep in mind that both credit cards and BNPLs are types of debt. Even if you don’t have to pay interest, you’ll have to repay what you spend.”

When to Choose Credit Cards

Credit cards might be the better option when:

You want to build credit: When improving your credit score is a priority
You value rewards: When you want to earn cash back, points, or miles on purchases
You need purchase protections: When you want extended warranties or insurance on purchases
You want flexibility: When you need to use your financing at many different merchants
You pay in full monthly: When you consistently pay your balance in full to avoid interest

“For example, it might make more sense to use a credit card with travel-related insurance benefits to pay for your next vacation,” says Kimberly Palmer, personal finance expert. “However, a BNPL might be best for a large purchase that you can pay off within six weeks.”

The Hybrid Approach: Credit Card BNPL Features

Many credit card issuers now offer their own versions of BNPL, combining elements of both payment methods:

Amex Plan It^®: Break purchases into fixed monthly payments with a plan fee instead of interest
My Chase Plan: Split eligible purchases of $100+ into fixed monthly payments with a plan fee
Citi Flex Pay: Convert purchases into fixed payment plans with a clear payoff date
Mastercard Installments: Allows installment payments on eligible purchases

These features give cardholders more payment flexibility while still allowing them to earn rewards and build credit. Unlike traditional BNPL, these options are typically offered post-purchase rather than at checkout.

“It’s worth checking what’s available to you because it might offer more flexibility,” Schmeltzer advises. “Your existing credit card may already offer BNPL-like features.”

Une personne faisant ses achats en ligne avec plaisir à la maison, tenant une carte de crédit et un téléphone, avec des sacs d'achats à ses côtés

Bottom Line: Making the Right Choice

The choice between BNPL and credit cards isn’t necessarily an either/or decision. Many consumers use both payment methods strategically depending on the specific purchase and their financial situation.

Consider BNPL for:

Specific large purchases you want to pay off quickly
Interest-free short-term financing
Predictable payment schedules
Situations where you want to avoid a credit check

Consider credit cards for:

Everyday spending where you want to earn rewards
Building your credit history
Purchases that benefit from additional protections
Maximum flexibility in where and how you can pay

Regardless of which option you choose, the most important factor is having a plan to pay off your purchases. Both BNPL and credit cards can lead to financial difficulties if used irresponsibly.

Before making any purchase with either payment method, consider whether you can truly afford the item and have a clear plan for repayment. The best financing option is always the one that fits within your budget and helps you achieve your financial goals without creating undue stress or debt.

Frequently Asked Questions

Does using Buy Now, Pay Later affect my credit score?

It depends on the specific BNPL provider. Historically, most BNPL services haven’t reported regular payment activity to credit bureaus, meaning on-time payments wouldn’t help build your credit. However, many would report negative information if you missed payments or defaulted. The landscape is changing, with some BNPL providers now beginning to report positive payment history to credit bureaus. If you’re concerned about credit impact, check the specific reporting policies of the BNPL service you’re considering.

What happens if I miss a payment with BNPL?

The consequences of missing a BNPL payment vary by provider, but typically include:

• Late fees (usually $7-$10 per missed payment)
• Blocked from making new BNPL purchases until caught up
• Possible reporting to credit bureaus
• In some cases, the entire remaining balance may become due immediately

Most BNPL providers will send reminders before payments are due, and many allow you to adjust payment dates. If you know you’ll miss a payment, contact the provider in advance to discuss options.

Can I return items purchased with BNPL?

Yes, you can return items purchased with BNPL, but the process can be more complicated than with credit cards. When you return an item purchased with BNPL:

1. The return is processed through the merchant according to their return policy
2. The merchant notifies the BNPL provider of the return
3. The BNPL provider then cancels or adjusts your remaining payments

This process can sometimes take longer than credit card refunds, and you may still be responsible for making scheduled payments until the return is fully processed. Some BNPL providers also have specific procedures for handling returns, so check their policies before making a return.

Are there spending limits with BNPL services?

Yes, BNPL services typically have spending limits that vary based on several factors:

• Your payment history with the BNPL provider
• The specific merchant you’re shopping with
• The price of the item you’re purchasing
• Your overall financial profile

New BNPL users often start with lower limits (perhaps a few hundred dollars), while established users with good payment history may qualify for higher limits (potentially several thousand dollars). Unlike credit cards with a fixed credit limit, BNPL providers often evaluate each purchase individually, so you might be approved for one purchase but declined for another of similar value.

Can I use BNPL for all types of purchases?

BNPL services are primarily available for retail purchases, both online and in-store at participating merchants. They’re most commonly offered for:

• Clothing and fashion items
• Electronics and appliances
• Furniture and home goods
• Beauty and wellness products

BNPL is less commonly available for:

• Groceries and everyday essentials
• Services (like haircuts or repairs)
• Bill payments
• Travel bookings (though this is changing)

Some BNPL providers now offer virtual cards that can be used more widely, but availability still varies significantly compared to credit cards, which can be used almost anywhere.

Which option is better for large purchases?

For large purchases, the better option depends on several factors:

BNPL may be better when:
• You need a short-term, interest-free payment plan (typically 6 weeks)
• You have a clear plan to pay off the purchase quickly
• The purchase is within the BNPL provider’s approval limits

Credit cards may be better when:
• You have a card with a 0% intro APR offer for 12-18 months
• You want purchase protections and extended warranties
• The purchase is very large and exceeds typical BNPL limits
• You want to earn rewards on the purchase

For very large purchases that you need more time to pay off, consider a personal loan or a credit card with a long 0% APR period, as these will typically offer better terms than the longer-term financing options from BNPL providers, which often charge interest rates similar to credit cards.

Jean-Maximilien Voisine

Jean-Maximilien Voisine is the President and Founder of Milesopedia and a leading expert in rewards programs, credit cards, and travel across Canada, France, and the U.S.A. Now 40 years old and a father of two, he has explored more than 100 countries—many of them alongside his wife Audrey and their children. Specializing in loyalty programs such as Aeroplan, Flying Blue, American Express Membership Rewards, and Marriott Bonvoy, Jean-Maximilien helps travellers unlock the full potential of their points and benefits. His mission: empower others to travel better and smarter across North America and Europe.

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