By Maddy Scheckel
March 9, 2023
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The popularity of buy now, pay later apps has increased tenfold since 2019.
Some people even think that they will take over credit cards in the coming years. But is this true?
Or are credit cards still the king of quick financing?
Personally, I use both buy now, pay later apps and credit cards. And after doing my own research, I’ve found a few benefits and drawbacks to each.
Below, I’ll give you a comparison of buy now, pay later vs credit card while also answering some commonly asked questions.
What Is The Difference Between Buy Now, Pay Later (BNPL) and Credit Cards?
Are you torn between signing up for buy now, pay later, and using a line of credit?
Here are four main differences between buy now, pay later vs credit cards:
- Most buy now, pay later apps have zero interest
- Credit cards often have higher spending limits
- Qualifying for buy now, pay later is usually easier
- Credit cards offer more flexible payment plans
Most Buy Now, Pay Later Apps Have Zero Interest
The major difference is that buy now pay later rarely charges interest, making it a more affordable way to borrow money.
If you’re using credit cards and are only paying the minimum monthly installment, you’ll carry your debt and interest from month to month.
Credit cards may also have fees such as:
- Annual fees
- Cash advance fees
- Foreign transaction fees
- Balance transfer fees
- Late payment fees
- Overdraft fees
Be careful, as these high fees and interest can leave you with more debt than you originally borrowed.
Credit Cards Often Have Higher Spending Limits
According to an Experian report, the average credit card limit in the U.S. was $30,365 in 2020.
Compared to buy now, pay later limits that usually max out around a few thousand dollars, credit cards allow you to make bigger purchases.
Qualifying For Buy Now, Pay Later is Usually Easier
Although application processes vary, signing up for a buy now, pay later service is generally quicker and easier than credit cards.
Most buy now, pay later apps offer instant approval, so after submitting your application, you’ll know if you’re successful.
Compare this to credit card applications, which can take several business days. During this time, your bank runs a hard credit pull, and if you qualify, they still need to package and ship your card to your doorstep.
This makes buy now, pay later a good option for consumers who need money quickly.
Applying for buy now, pay later apps is also easier than credit cards as the requirements are more relaxed. Oftentimes, there are no minimum credit score requirements.
Many individuals that can’t qualify for credit cards will qualify for buy now, pay later.
On the other hand, most credit card companies will decline your application if your credit is subpar.
Tip: Some credit card companies will give you your card number to use for online purchases once you’ve been approved. This means you don’t have to wait until you receive a physical card to begin spending!
Credit Cards Offer More Flexible Payment Plans
Buy now, pay later generally offers payment plans in four installments, whereas credit cards allow consumers to pay over longer periods of time.
This means that you most likely will have to pay off your buy now, pay later loans within six weeks.
For example, if your cart is worth $200, you’ll pay $50 today and $50 every second week until it’s paid off.
Pros and Cons of Buy Now, Pay Later (BNPL) and Credit Cards
Consider these pros and cons of buy now, pay later vs credit cards.
Pros and Cons of Buy Now, Pay Later
| Pros | Cons |
| Applying is super easy | Payment plans are rigid |
| Approval is usually instant | Missing payments can hurt your credit |
| Most buy now, pay later apps charge zero interest | Spending limits are small compared to credit cards |
| Applying for an account doesn’t affect your credit score | Not all retailers accept buy now, pay later |
Pros and Cons of Credit Cards
| Pros | Cons |
| Credit cards work at a wider variety of retailers | The interest can leave you in more debt |
| The spending limits are often higher than buy now, pay later | Approval isn’t always instant |
| Opportunities to earn cashback and travel points | It can come with a range of fees like annual fees and balance transfer fees |
| You can pay off at your own pace | Applying for a credit card can temporarily lower your credit score |
Credit Cards That Also Offer Buy Now, Pay Later (BNPL)
Many major credit card companies have begun offering their own buy now, pay later features
Most credit card companies are creating their own buy now, pay later plans. So if you bank with any of these companies, consider trying out their buy now, pay later feature.
The Plan It feature comes with some American Express credit cards. It allows you to set up a payment plan, and instead of paying interest on it, you pay a monthly fee.
The monthly fee is based on your American Express Credit Card APR.
You can check out your AmEx account to see if you have Plan It.
Chase also has a buy now pay later feature called My Chase Plan. It charges zero interest and is available with most Chase credit cards. However, you’ll have to pay a monthly fee to access this buy now, pay later function.
To utilize My Chase Plan, go to your Chase account and select the My Chase Plan section.
Citi offers Citi Flex Pay, where you can pay off purchases on your credit card through fixed payments and with fixed interest.
Go to your Citi account to see if your purchase qualifies for Citi Flex Pay.
The Upgrade credit card markets itself as a financial product with the flexibility of a credit card and the low interest of personal loans.
But what sets it apart from regular credit cards is the fixed monthly payments.
Mastercard has a buy now, pay later feature called Mastercard Installments.
Instead of paying for something in full or using a credit card, opt into Mastercard Installments and choose between multiple payment plans, including a pay-in-4 plan. These plans have zero interest and offer instant approval during checkout.
Commonly Asked Questions About Buy Now, Pay Later Vs Credit Card
Is Buy Now, Pay Later (BNPL) a Good Idea?
Buy now, pay later is a good idea if you aren’t using it all the time. It’s best for anyone making large, once-off purchases. But if you impulse shop, I suggest avoiding it as it encourages overspending.
Is It Better To Use a Credit Card Or Afterpay?
If you’re looking to pay zero interest, buy now, pay later apps like Afterpay are a better option than credit cards. However, if you need flexible payment plans, more time to pay off your loan, and higher limits, credit cards are more practical.
Will Buy Now, Pay Later Replace Credit Cards?
While it’s unlikely that buy now, pay later will entirely replace credit cards, it’s a good alternative as you don’t usually pay interest. However, many consumers still like that credit cards have higher spending limits and provide more flexible plans.
How Does BNPL Make Money?
BNPL makes money from retailers. They’ll take a cut of anything that a retailer sells using their BNPL service. Retailers don’t mind paying this fee because it boosts sales. For instance, Klarna claims that the average retailer sees a 68% increase in average order value when partnering with BNPL.
Buy Now, Pay Later Vs Installments?
The primary difference between buy now, pay later vs credit card installments is that you don’t pay interest when using most buy now, pay later apps.
Buy Now, Pay Later Credit Card?
Many buy now, pay later services are starting to provide cards similar to credit cards but without interest. For example, Klarna has a card that allows you to shop anywhere Visa is accepted for just $4.99 per month.
Apple Pay Later Vs Credit Card?
Apple Pay Later is a buy now, pay later service that you can use wherever Apple Pay is accepted. Like a credit card, you do have to apply and be approved to use the service. Unlike most credit cards, there is no interest or fees associated with Apple Pay Later.
