Is ‘Buy Now, Pay Later’ Safer Than a Credit Card for Holiday Purchases?

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The answers you need could be hidden in the fine print.


Key points

  • Buy Now, Pay Later (BNPL) services and credit cards both enable you to pay for purchases over time.
  • Though they work slightly differently, they have similar consequences for those who fail to pay.
  • One may suit you better than the other depending on your situation.

Picture this: You confidently approach the checkout with a cart full of holiday purchases and pay for everything in cash. Then, once the day arrives, you watch your delighted friends and relatives unwrap their gifts as you rest comfortably, knowing the bill’s already taken care of. That’s one Christmas miracle we could all get behind. But reality isn’t often like that.

Sometimes, we need a little help with our holiday bills, and these days, we have more options than ever. Two of the most popular right now are credit cards and Buy Now, Pay Later (BNPL) services. Here’s what you need to know about both to decide which is right for you this year.

How credit cards work

Credit cards are the go-to option for many people shopping online because they’re safer than using debit cards. As long as you pay your bill in full at the end of the month, you’re golden. You’ll only owe the amount you actually spent over the last month, and you might even earn some rewards points you can put toward future purchases.

But things can get hairy pretty quickly if you have to carry a balance. You won’t incur any late fees as long as you make the card’s minimum payment. But the remaining balance will begin to accrue interest, and this can add up quickly.

Some credit cards charge annual percentage rates (APRs) over 20%, causing your balance to balloon quickly. These extra interest charges make it even more difficult to pay back what you owe, leading to a debt spiral that can last for months or even years.

How Buy Now, Pay Later services work

BNPL services are similar to credit cards in many ways. You usually enroll in this service at checkout, and you can complete your purchase without paying the full price for an item. However, you usually have to pay a small amount up front.

Then, you pay for the remainder in installments over time. Exact terms vary depending on the BNPL provider. Some charge interest, but others don’t as long as you keep up with your payments. A lot of people like the flexibility these services provide, but they can be just as dangerous as credit cards if you ignore the terms.

Missing payments can lead to consequences, including:

  • Late fees
  • Interest charges on the remaining balance
  • Being reported to a collections agency

This can also hurt your credit score in the long term, which could cost you a lot of money the next time you need to take out a loan.

So which is better?

Ultimately, the best course of action for you depends on your personal situation. If you stay on top of your payments, a credit card might be the better option. Not only does this enable you to make purchases just about anywhere, but the rewards you earn can help offset some of the cost of your items over the long term.

If you’re worried about interest charges, a BNPL service might be a better fit if you can find one with flexible terms and no interest rate. But not all retailers offer BNPL, and the ones that do often work with a specific provider, so you may not get to choose which service you’ll pay through.

Before you make any decisions, review all the options available to you and dig into their terms and conditions. Learn about when you’ll be expected to repay what you owe and what could happen if you fall behind on your payments. Then, choose the one that offers the fewest downsides.

Whichever method you go with, be sure to keep track of how much you’re spending so you don’t go overboard. It’s easy to lose track of how much you’ve bought, especially when you’re shopping at multiple retailers and using cards instead of cash. Keep your list of purchases close at hand so you know how much more room you have in your budget.

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