You can actually get gifts for your purchases.
- While a buy now, pay later plan allows you to finance your purchase in a short time without interest, you don’t get any financial rewards in the process.
- Credit cards allow you to get cash back and rewards for making purchases, and if you pay the bill in full, you can also avoid interest.
If you often hear about buy now, pay later packages, or BNPL packages, there’s a reason. Research from The Ascent from last year found that 50% of consumers use these plans, and 39% of those who have never used them are likely to do so sometime soon.
Now, it’s easy to see why the BNPL plan is attracting so many consumers. These agreements allow you to pay for your purchases in installments over a short period of time — usually 12 weeks or less. As long as you stick to the terms of your agreement, you will not be charged any fees or interest charges.
But I’m actually not a fan of the BNPL plan at all – not for myself, and not for the average consumer. In fact, I think a credit card is a much better option than a BNPL plan.
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Why do I prefer credit cards
When you finance a purchase using a BNPL package, you get the advantage of not being charged interest or fees as long as you make payments on time. But you can’t get any cash back or rewards in the process.
When you charge your credit card, you Can Get financially rewarded for everyday purchases like fuel, groceries and apparel. And that cash back can really add up. In fact, last year, I earned over $1,000 in cash back on my most used credit card.
You might argue that when you use a credit card, you face the possibility of racking up interest on your purchases if you don’t pay your bill in full. But if you’re someone who always pays their credit card bills in full when they’re due, then that shouldn’t be a problem.
I also happen to think that the BNPL plan gives consumers a false sense of security in terms of being able to buy. I think if you’re looking to buy a $700 TV and you need to split your payment over three months because you can’t charge the full amount up front, then you shouldn’t buy a TV.
Instead, you have to wait until you have $700 to close the purchase. At that point, you can charge it to a credit card, get cashback or rewards points on your $700 purchase, then pay the bill in full when it’s due.
One reason to use a BNPL plan
If you have emergency expenses that you need to cover immediately — say, a new fridge because your current one stopped working beyond repair — then a BNPL plan might make sense. However, a credit card may be your better option because you have more time to pay off the purchase in question.
If a new refrigerator costs $1,500 and you can only cover a fraction of it right now, you may not be able to pay it off in three months. And if you are late paying for the BNPL package, you will face interest, fees, and credit score damage.
On the other hand, if you make the minimum credit card payments until your fridge is paid off, your credit score won’t be affected. And yes, you will be paying credit card interest in this scenario. But you will also be charged extra with the BNPL package, so your situation may not be worse. If anything, you may be better off because you may be able to successfully maintain your credit score and get money back on purchases you had no choice but to make.
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