Buy Now, Pay Later vs. Credit Cards: What’s Right For You? | Personal finance
In short, BNPL may offer more flexible terms, while credit cards will generally offer more flexible acceptance.
How expensive and accessible will the funding be?
BNPL’s interest rates and fees vary widely. Some options bear no interest or fees, making it essentially free financing for the consumer. (BNPL providers still make money on merchant fees embedded in the product price, just as payment networks do on interchange fees for credit cards.)
“They have a fixed cost or no cost and are very clear in showing you how much it will cost,” says Ginger Schmeltzer, senior analyst for Aite Group’s retail banking and payments practice. “People like its predictability,” she adds.
The longer-term loans offered by BNPL – which can last up to 48 months – typically carry an interest rate, she says, much like a traditional personal loan. But unlike a loan or credit card, many BNPL providers don’t check credit when approving buyers, making it easier to access finance.
Credit card issuers, on the other hand, will almost always withdraw your credit when you apply, so depending on your credit scores, this may not be an option for you. If you already have one and plan to use it to finance a purchase, be aware that credit card interest rates are generally variable and tend to be quite high.