Buy Now Pay Later vs Credit Cards – which one is the better option for you? We are going to discuss the pros and cons of BNPL vs Credit Cards below.
Buy Now Pay Later vs Credit Cards
Let’s start off by examining the pros and cons of each option. Buy Now Pay Later (BNPL) is a great choice if you’re looking to finance a purchase without taking on interest bearing debt.
What is BNPL? Most have probably seen BNPL advertised when shopping online but haven’t used it yet. BNPL is a simple form of credit. Unlike credit cards, BNPL does not charge intesest.
The biggest benefit of BNPL is that you can spread out your payments over time. This makes it easier to budget for costs, as you don’t have to pay the full amount up for a product upfront. BNPL is a form of credit that has no interest, if you make the set payments on time. Some BNPL companies, such a Affirm, don’t have late fees or interest on late or missed payments. (Don’t count on this for most BNPL companies though.)
The reason BNPL services typically don’t charge interest is how they make money. BNPL companies make money by charging merchants and retailers a fee for using their service. So the cost of the credit and loan is on the company selling, not the person buying.
This makes BNPL an attractive option for consumers who want to spread out the cost of a purchase over several weeks or months without worrying about additional charges. BNPL can be an effective way to manage your finances without accumulating debt.
While BNPL can be a useful tool for managing cash flow and budgeting expenses, it’s important to weigh the pros and cons before using BNPL as a form of credit. For some consumers, traditional credit cards may still be a better option depending on their financial situation and spending habits.
Credit Cards have the advantage that they’re incredibly convenient. You can use them at any store that accepts credit cards. Before I started writing this article I paid for my lunch/brunch with a friend with a Visa credit card for instance. BNPL by comparison is not available as widely. Some BNPL companies have started offer cards so you can pay for purchases, though not all have done so.
While credit cards are a great convenience, they can also be a bit of a trap. It’s easy to get carried away with your spending when you’re not physically handing over cash. Credit cards allow you to “buy now and pay later”, but the interest rates on unpaid balances can quickly add up. If you’re not careful, you could find yourself drowning in debt. At the time of this writing American total credit card debt was estimated to be 930 billion dollars. Credit card debt has ballooned as the economy has softened.
A lot of credit card companies and banks offer special offers and rewards programs with points. You can often use these points to buy products or book a vacation. In addition some credit cards even offer cash back for purchases, which can add up to a lot of money back in your pocket over time. I am currently do not aware of any BNPL companies that offer this cashback or a points program.
It’s important to note that credit cards have interest on the money you borrow. Generally if you pay off the money you borrowed within 30 days, you won’t pay interest on a credit card. It varies between what type of credit card you have and credit score. You could be hit with significant fees and penalties with credit card accounts if you don’t pay ontime.
Should I use BNPL or Credit Cards?
BNPL vs Credit Cards? Which one should you choose? Ultimately, it depends on your individual needs and financial situation. If you’re looking to finance a purchase without taking on debt, then BNPL is the way to go. However, if you’re looking for convenience, then credit cards typically are the more ideal option.
When deciding between Credit Cards vs Buy Now Pay Later, you need to sit down and figure out your own financial situation and spending habits. If you have the means to pay off your balance in full each month, using a credit card may be the better choice. As a consumer you can earn rewards or cash back while avoiding those pesky interest rates. However, if you are unable to pay off your credit card balance immediately or prefer not to use credit cards altogether, BNPL may be the better choice.
Ultimately, both credit cards and BNPL options can be useful tools when used responsibly. It’s important to weigh the pros and cons of each option before making any large purchasing decisions using BNPL or credit cards.
Either way, it’s important to do your research and figure out the best option that works for you, your family, and current financial situation.