Buy Now, Pay Later, Or Credit Cards: Which Is A Best Financing Option For Consumers?

It is reliant on how much financial flexibility you need, the cost of each option, and if you choose incentives or predictability.

The “buy now, pay later” (or “BNPL”) idea is gaining traction in the current days. Also, the best part about this is that Buy now pay later guaranteed approval which influences the people to opt for this particular option.

Consumers are options for services like Afterpay, Affirm, and Klarna, which allow them to split big purchases into smaller installments.

As a result of the pandemic, more and more people are using BNPL services.

Around 51 percent of consumers prefer using these services during the crisis that arose due to pandemics.

The popularity of these services is mainly due to the convenience factor associated with them. Also, with the increasing emergence of online shopping, more and more customers have become aware of it.

Other than that, credit cards are also helpful financial tools. In contrast to BNPL, credit cards can be utilized almost everywhere.

Talking about the credit card balances, it contributes to building up until the cardholder pays them off, leaving the cardholder with less assurance.

The predictability of BNPL seems to be appealing to a significant number of consumers. 38 percent of BNPL consumers anticipate it to eventually replace their credit cards, according to Czarnecki’s study.

Credit cards, on the other hand, provide benefits that BNPL alternatives do not, such as rewards as well as credit bureau reporting of positive payment history. Furthermore, card issuers are increasingly offering their BNPL versions.

Consider the following questions while choosing between BNPL, and credit cards.

What Level Of Financial Flexibility Do You Want To Opt For?

According to a research survey, 45 percent of users (BNPL) said it was easier to pay with the BNPL when compared to the credit card option, and 44 percent said it gave them more suppleness.

With the help of a credit card, you must consider paying the minimum amount at the month-end, but with the BNPL option, you get the flexibility to choose in between three, five, or twelve months, as per Czarnecki.

You have the option of setting up a payment in several ways that fit your requirements.

According to Casey Merolla, MD of the payments group of Accenture, mental accounting is considered to be much easier for certain clients. In this regard, people think they have more financial control. It is regarded as a one-time transaction, not an open-ended or revolving one.

All that you need is to pay it off and you’re done. Individuals may now have a little more control over their spending.

It also contributes to providing a new financing option for individuals who do not have access to a credit card, according to her. Flexibility, on the other hand, is a subjective concept.

Credit cards may be used for a broad variety of purchases, while BNPL options are restricted to a single purchase from a single merchant. So, it can be said that BNPL can provide more compliant terms, whereas credit cards are more likely to offer more flexible acceptance.

What Will The Cost Of Financing Be, And How Easy Will It Be To Obtain?

There is a wide variance in the fees and rates that are charged by the BNPL. Some options do not charge any interest or fees, making them interest-free financing for the consumer.

(In the same way that payment networks earn from interchange fees for credit cards, BNPL providers profit from merchant fees embedded into the product price).

They have either a no-cost or fixed charge. Also, it is found that they are very upfront about informing you how much it would cost, and people like its regularity.

Also, BNPL’s longer-term loans, which may last for about 48 months, usually carry a rate of interest when compared to a traditional personal loan.

Many BNPL providers, unlike a credit card or a loan, do not verify credit before they approve any shoppers, and thereby making financing more accessible.  

On the other hand, credit card companies, always consider pulling your credit whenever you consider applying.

So, based on your credit scores, you may not find it a good option. But, if you are having a credit card and want to use it for purchase, bear in mind that the interest rates of credit cards vary. But, sometimes, it may be very high.

It’s crucial to note, however, that if you focus on paying your credit card bill in full amount before the due date, the annual percentage rate of the card is considered to be unrelated. You would not owe any interest in this case.

Do You Want To Be Rewarded Or Want Accessibility?

Whenever you make use of a credit card for making any specific purchase, you may get cashback, miles, or points.

In case, you are having good credit, you can easily obtain a card that contributes to providing you about 2% cashback on each purchase. Again, this can result in a lot of savings.

Talking about credit cards, typically come with additional advantages like insurance as well as protection on purchase.

These types of incentives or protections aren’t always accessible with BNPL providers. And, credit-reporting benefits aren’t always available with credit cards.

A lot of the BNPL services don’t consider reporting back to the credit agencies, so consumers cannot build up that particular history. It is also seen that some of the providers are focusing to do so.

In contrast to credit cards, BNPL does have an instinctive aspect that some customers — and even some experts — find appealing. Due to this particular reason, a lot of them consider opting for financing the purchase using a buy now, pay later option.

This option is mostly preferred due to its user-friendliness. It is as simple as clicking on it from the cart. The best part is that it is authorized immediately.

In terms of budgeting, it was also easier for him. He was willing to sacrifice rewards for the sake of convenience.

Is There A Buy-Now, Pay-Later Option Available With Your Credit Card Company?

Consider what you currently have in your wallet before taking advantage of a BNPL offer. Credit card firms are progressively offering their specific versions of conventional payment plans for specific products, as they keep a close watch on BNPL’s progress.

Depending on the users, the availability of this keeps on varying. Also, restrictions and set monthly fees may pertain based on the feature. However, consider the following examples:

• My Chase Plan from Chase
• Startup issuer Upgrade’s credit cards
• Citi Flex Pay is a product offered by Citi
• The Plan It® feature from American Express

Unlike BNPL, these types of plans are considered to be post-purchase. Also, it’s worth looking into what’s accessible to you because it may provide you more flexibility.

Final Verdict

I hope, from the above-mentioned section, you have got a clear idea about the differences existing between buy now pay later, and credit cards options.

Currently, a greater number of people are considering opting for this option due to its Buy now pay later guaranteed approval. This is what is driving people to this particular option.