Buy now, pay later (BNPL) offers can be better than a credit card in some cases, depending on what fees and interest rates you get and how much time you need to pay off your purchase. Some people prefer BNPL because of the convenient payments and flexibility, though credit cards offer better rewards and benefits.
If you don’t need to finance your purchase for long, a rewards card is the way to go because it could save you hundreds of dollars per year. Similarly, if you won’t be able to pay off your purchase in a handful of installments, a 0% APR credit card is preferable, assuming you can get approved for a long interest-free period.
What Is Buy Now, Pay Later?
Buy now, pay later (BNPL) is a type of financing that gives you an installment loan to make a purchase. You then repay this loan in equal amounts at regular intervals, usually weekly, biweekly, or once a month. BNPL loans often come without interest or any fees so long as you pay on time, but they can’t be used as broadly as credit cards.
BNPL deals tend to be offered by retailers when you check out, as a way to split a larger purchase into smaller, more affordable installments. They’re also available through certain mobile apps like Apple Pay and PayPal.
How Is BNPL Different From a Credit Card?
Credit cards work a bit differently from buy now, pay later programs. For one thing, they require a minimum payment based on your existing balance each month, and they will charge interest on any balance that you carry past the due date. You typically have to meet certain credit score and income requirements to qualify, too, so they’re harder to get than BNPL loans. Plus, a BNPL loan only works for a single purchase, while credit cards use revolving credit, allowing you to use the same credit line over and over as long as you pay off your balance as you go.
It’s also worth noting that many credit cards have introductory 0% APRs that you can use to finance purchases, but the best offers require a 700+ credit score. If you can qualify for one of these cards, you may be able to get a significantly longer interest-free period than you would with a BNPL deal.
In addition, credit cards are more likely to report to the credit bureaus and help improve your credit score. Many also offer rewards and benefits that can save you money if you use your card responsibly.
Buy Now, Pay Later vs. Credit Cards
| Type of Credit | Buy Now, Pay Later | Credit Cards |
|---|---|---|
| Annual Fees | No | Sometimes |
| Late Fees | Most of the time | Most of the time |
| Interest Rates | Usually no interest | Average of 22.76% for new cards (for balances not paid in full by the due date) |
| Payment Frequency | Usually monthly or bi-weekly | Once a month |
| Payment Amount | Equal amounts based on the cost of your purchase and number of payments | Usually $15 to $40 or 1% to 3% of the card balance at a minimum |
| Offered By | Online lenders and banks in partnership with retailers | Banks and credit unions |
| Flexibility | You may have multiple options for how many payments your purchase will be split into | You can choose how much to pay each month, above a set minimum |
| Risks | Late fees, easy impulse borrowing for things you can’t afford, interest charges in some cases, and fewer buyer protections than credit cards | Interest, late fees, accumulation of unsustainable debt, and credit score damage if used irresponsibly |
| Credit Score Impact | Only sometimes reported to the credit bureaus, but can help your score if reported | Reported to the credit bureaus and help your score if used responsibly |
Because of these differences, BNPL loans and credit cards could each be the better option for different types of purchases. For instance, BNPL loans are good for large, one-time expenses like furniture or electronics, while credit cards are usually better for recurring expenses. Both types of credit also come with their own advantages and drawbacks.
Pros and Cons of Credit Cards
| Pros | Cons |
| Many offer rewards that save you money in the form of points, miles, or cash back | Require a hard credit pull when you apply |
| All cards offer fraud protection, and some have other benefits like travel insurance, purchase protection and extended warranties | Charge interest if you carry a balance |
| Can be used for more types of purchases than BNPL | Sometimes charge annual fees |
| Report to credit bureaus monthly | Potential to fall into debt |
Depending on your credit standing and financial circumstances, you may be able to avoid some of the disadvantages of credit cards. For instance, if you have a higher credit score (700+), you’re more likely to qualify for a 0% APR card that will let you pay off a balance over several months without any additional cost. Credit cards typically won’t charge interest if you pay off your full balance by the due date, but 0% APR cards are useful for longer-term financing while also getting the benefits that BNPL loans typically lack, such as fraud protection and rewards.
You can learn more from WalletHub’s full guide on the pros and cons of credit cards.
Pros and Cons of Buy Now, Pay Later
| Pros | Cons |
| No interest (usually) | No rewards |
| Payments are the same amount every month | Not widely available |
| Approval is usually quick and easy, and doesn’t require a credit check | Lack of consumer protections that make it easy to dispute or return a purchase |
| You may be able to choose how many payments to split a purchase into | Don’t always report to the credit bureaus |
Like credit cards, BNPL services typically charge late fees if you miss a payment. However, these are usually the only fees they charge. The main advantage to getting a BNPL loan is that you can get approved right when you make a purchase and divide the expense into consistent payments that fit your budget and schedule.
Buy Now, Pay Later on Credit Cards
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BNPL services have become a popular alternative to credit cards, so many credit card companies have started implementing BNPL features on their cards. For instance, Amex Plan It and Chase Pay Over Time let you pay off large purchases made with your credit card in installments. Unlike regular BNPL services, these programs charge a small fee. You don’t have to pay interest, though.
Some of the most popular BNPL programs offered by credit cards are:
American Express Plan It®
American Express Plan It is a feature offered on American Express consumer cards that allows you to pay off certain purchases of $100+ in installments with a flat fee rather than your card’s normal APR. You can have up to 10 of these monthly plans at one time and you will know upfront how much you will pay.
Chase Pay Over Time
Chase Pay Over Time, which used to be known as My Chase Plan, lets you pay off certain $100+ purchases in installments with a low monthly fee. For Amazon purchases specifically, the fee changes to a fixed APR that’s the same as or lower than your card’s normal APR.
Citi Flex Pay
Citi Flex Pay allows you to split eligible purchases of $75+ into equal monthly installment payments with a low monthly fee through the Citi mobile app or your online account. There’s even an option to have a $0 monthly fee and no interest on 3-month payment plans when you use your card through Apple Pay on your iPhone or iPad.
U.S. Bank ExtendPay® Plan
Using the U.S. Bank ExtendPay Plan requires you to make an eligible purchase of $100 or more with your card. You can then pay off that purchase in equal monthly installments ranging from 3-24 months, with a fixed low fee instead of interest.
Upgrade Credit Cards
The Upgrade Cash Rewards Visa® and the Upgrade Triple Cash Rewards Visa® function similarly to buy now, pay later programs. If you carry a balance, your monthly bill gets split up into monthly installments, which are typically higher than the minimum payments on other credit cards.
Mastercard Installments
The Mastercard® Installments program is another BNPL option, which you can use for online purchases or in-person purchases with a mobile wallet. These loans come from third-party lenders, rather than Mastercard or your credit card issuer.
When to Use BNPL vs. Credit Cards
Whether a credit card or a BNPL service is better for a given purchase ultimately depends on what you want to accomplish.
For example, if you’re looking to pay off a purchase over several months, BNPL loans are a good way to avoid the expensive interest rates that are frequently found on credit cards. But if you need to pay off several purchases over a year or more, rather than one large purchase over a few months, a 0% APR credit card is likely your best option because you can get interest-free financing for as long as 24 months in some cases.
That said, it’s always good to have a credit card, even if you don’t plan on using it right away. Credit cards offer a convenient payment option, can save you money with rewards, and are the best way to build your credit. Not using a credit card for everyday purchases would mean sacrificing a lot of potential savings.
Will BNPL Replace Credit Cards?
Buy now, pay later programs are unlikely to replace credit cards, at least any time in the near future. Credit cards are too popular and too convenient to be phased out in favor of BNPL loans.
Here are some of the main reasons why BNPL isn’t replacing credit cards:
Credit Cards Are Used Far More
BNPL is often offered to people who are shopping online but is less common for in-store purchases. Meanwhile, credit cards are convenient for purchases made both in-person and online. In fact, 35% of all purchases are made with credit cards, another 30% with debit cards, and a good portion of the rest with cash. So BNPL programs definitely aren’t dominating consumer’s spending habits.
Credit Cards Are More Convenient
Credit cards make your purchases much easier to keep track of. You can see everything you’ve bought all in one place in your online account and on your monthly statements. Conversely, each BNPL offer is its own separate loan that you have to keep track of. If you had to use that for every purchase you didn’t want to pay for with cash or debit immediately, life would get pretty inconvenient.
Credit Cards Offer the Most Flexible Financing
Credit cards are still a great way to finance purchases both short-term and over long periods. If you always pay back what you owe before your next due date, you never owe interest. And if you need 6-12+ months of 0% financing, you can get a 0% APR credit card. BNPL programs help fill the niche in between short- and long-term financing.
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