Should I Use Buy Now, Pay Later or Credit Cards?
25 February 2025In recent years, payment options have expanded beyond the traditional. With the rise in popularity of Buy Now, Pay Later services, it’s not always easy to figure out which way to pay is best.
After all, they both offer payment flexibility. They allow you to borrow money, make that big purchase or get that last-minute birthday gift the week before payday. But which option is smarter for your financial health – and your shopping habits?
Buy Now, Pay Later gives you the chance to spread or delay the cost of your purchase over a period of time. The provider pays for the goods you’re purchasing; you then repay the provider. They don’t charge fees for this, and the repayments are interest-free. Instead, they take a percentage of the sale from the retailer.
Klarna is a popular Buy Now, Pay Later provider. When making a purchase, Klarna gives you the choice of paying in three interest-free instalments every 30 days, or paying in full within 30 days. The Klarna app tracks the money you owe and can send reminders when payments are due.
Credit cards also delay your payment. The financial provider of your credit card pays for goods; you then repay the provider. If you repay the amount owed in the timeframe (typically between 20-55 days) you don’t pay interest on your purchase.
Some credit cards offer introductory deals, like an extended interest-free period. This can be a good option if you’re planning on making a large purchase that you’ll need a few months to repay. Others offer cashback incentives or other rewards for using them (and some charge a fee for this too). Cashback and rewards usually work on a usage basis – the more you use the credit card, the more cashback or rewards you can earn.
Buy Now, Pay Later Pros:
Buy Now, Pay Later Cons:
Credit Card Pros:
Credit Card Cons:
Many retailers offer both credit cards and Buy Now, Pay Later as flexible, user-friendly payment methods. So, when is it better to use a Buy Now, Pay Later service, and when might a credit card be more suitable?
Paying for something expensive (think a new TV or piece of furniture)? A Buy Now, Pay Later spread the cost option may help you manage such a large expense within your usual monthly outgoings. Remember some credit cards do offer this option as well.
For items you’re confident you can pay for in a 30-day period, Buy Now, Pay Later can be an easier short-term route due to the quick setup. In the long term though, a credit card could be the better option, as – if you can continually meet your repayments – you’ll build up your credit score. You’ll also be able to take advantage of any reward schemes available, which means you’ll earn back on your purchases. Of course, this depends on your financial situation too. If you know your credit score isn’t great, the soft check of Buy Now, Pay Later services may feel like the safer option.
Still not sure if a credit card is for you? A prepaid credit card could be perfect. It allows you to skip the credit check – so they’re great if you don’t have a good score. And, rather than borrowing money, you load a prepaid credit card upfront so it’s easier to control your spending.
After all, they both offer payment flexibility. They allow you to borrow money, make that big purchase or get that last-minute birthday gift the week before payday. But which option is smarter for your financial health – and your shopping habits?
What is Buy Now, Pay Later?
Buy Now, Pay Later gives you the chance to spread or delay the cost of your purchase over a period of time. The provider pays for the goods you’re purchasing; you then repay the provider. They don’t charge fees for this, and the repayments are interest-free. Instead, they take a percentage of the sale from the retailer.
What is Klarna?
Klarna is a popular Buy Now, Pay Later provider. When making a purchase, Klarna gives you the choice of paying in three interest-free instalments every 30 days, or paying in full within 30 days. The Klarna app tracks the money you owe and can send reminders when payments are due.
How Does a Credit Card Work?
Credit cards also delay your payment. The financial provider of your credit card pays for goods; you then repay the provider. If you repay the amount owed in the timeframe (typically between 20-55 days) you don’t pay interest on your purchase.
Some credit cards offer introductory deals, like an extended interest-free period. This can be a good option if you’re planning on making a large purchase that you’ll need a few months to repay. Others offer cashback incentives or other rewards for using them (and some charge a fee for this too). Cashback and rewards usually work on a usage basis – the more you use the credit card, the more cashback or rewards you can earn.
Pros & Cons of Buy Now, Pay Later
Buy Now, Pay Later Pros:
- Flexibility: the option to pay across instalments or delay the payment by 30 days means you can choose what works for you
- No interest: if you repay on time, you won’t be charged any interest or fees
- It’s easy to set up: all you need to do is register and link your bank account. Buy Now, Pay Later providers usually only perform a soft credit check. This won’t affect your credit score and can’t be viewed by other lenders
Buy Now, Pay Later Cons:
- Risk of missing payments: it can be difficult to keep track of what you owe, especially if you use various services or owe multiple amounts
- Potential late fees and interest: if you miss a payment you might be charged a late fee or have to pay high interest rates
- The impact on your credit score: on-time payments aren’t reported so can’t have a positive impact on your credit score. But, if you miss a payment, it can negatively affect your credit score
- Buy Now, Pay Later services are currently unregulated: the UK government does plan to bring in new regulations, but if approved these won’t likely be in effect until 2026
Pros & Cons of Credit Cards
Credit Card Pros:
- They help build your credit score: credit cards report all your repayment activity. If you always meet your monthly payments and pay your balance in full, it can have a positive impact on your credit score
- You can earn rewards: many credit cards offer incentives like cashback or points for using them. So the more you use your credit card, the more you get back
- Good for emergencies: credit cards can give you instant access to funds should an unexpected but vital payment crop up
Credit Card Cons:
- High interest rates: if you don’t pay off your credit card in full each month, you’ll be charged interest on your balance
- Potential to overspend: the money you’re spending on a credit card may seem less tangible than money leaving your bank account. This can make it easier to impulse buy
- Fees: some credit cards, especially those that offer rewards, charge an annual fee
How Do They Compare?
Which Option is Smarter For You?
Many retailers offer both credit cards and Buy Now, Pay Later as flexible, user-friendly payment methods. So, when is it better to use a Buy Now, Pay Later service, and when might a credit card be more suitable?
Paying for something expensive (think a new TV or piece of furniture)? A Buy Now, Pay Later spread the cost option may help you manage such a large expense within your usual monthly outgoings. Remember some credit cards do offer this option as well.
For items you’re confident you can pay for in a 30-day period, Buy Now, Pay Later can be an easier short-term route due to the quick setup. In the long term though, a credit card could be the better option, as – if you can continually meet your repayments – you’ll build up your credit score. You’ll also be able to take advantage of any reward schemes available, which means you’ll earn back on your purchases. Of course, this depends on your financial situation too. If you know your credit score isn’t great, the soft check of Buy Now, Pay Later services may feel like the safer option.
Still not sure if a credit card is for you? A prepaid credit card could be perfect. It allows you to skip the credit check – so they’re great if you don’t have a good score. And, rather than borrowing money, you load a prepaid credit card upfront so it’s easier to control your spending.