How a Credit Card compares to Buy Now, Pay Later

Due to its universal acceptance, credit cards can be used almost anywhere, and across a wide range of retailers. Depending on what card you get, you can use it to build credit history, earn points or other rewards on your everyday spending, and make new purchases without having to pay any interest. Here's how paying with a credit card compares to Buy Now, Pay Later (BNPL).

woman shopping online using laptop

What is a credit card?

A credit card could be a convenient way of borrowing money, and it allows you to pay back whatever you’ve spent monthly. By meeting your payment dates and paying what you owe in full every month, it could help build your credit score. This is important to do as lenders will look at your credit history to help them decide whether to lend to you. Therefore, having a good credit score could improve your chances of being accepted for credit in the future.

And if you don’t already know, here’s how to check your credit score.

What is Buy Now, Pay Later?

The Buy Now, Pay Later model exists so shoppers can buy items on credit and spread the repayments into smaller amounts over a set period of time.

A typical BNPL model works like this:

  1. A BNPL company agrees to partner with a popular retailer that offers BNPL as a payment method
  2. The customer selects the BNPL option at checkout
  3. The customer can then receive the item immediately, but pay for it later, usually over a series of instalments on a set date by the BNPL provider.

How a credit card is different from Buy Now, Pay Later

Both credit cards and BNPL lets you borrow money to fund your purchase, and then spread the cost of your spending. However, there are still key differences.

Unlike the credit cards market, the BNPL market is currently unregulated. This can carry unintended consequences that consumers are often unaware of, according to research from Barclays

Regulated lending means customers are required to undergo robust affordability assessments of their financial circumstances before a loan is approved. This ensures that the customer is only borrowing what they are comfortably able to pay back.

With unregulated products, one major pitfall is that thorough checks on a customer’s personal financial circumstances are not always carried out, and as a result, customers may be more likely to have insufficient funds available to pay back borrowing on time. Furthermore, an unregulated BNPL market means users lack the same vital consumer protection as regulated credit card products.

Why a credit card could be an alternative for you

While a credit card isn’t for everyone, there are a whole host of reasons why taking out a credit card could be a more responsible option compared to using a BNPL company.

Credit cards might be better for planned large purchases

Some credit cards offer 0% interest, which means you can buy things straightaway, then pay off the amount you’ve spent within a set period of time without any interest. 

For example, if you used a purchase card and it had a 24-month 0% interest rate period, you could pay upfront for a purchase and not pay any interest until the 24 month period has finished.

However, one thing to remember is that once the promotional period is over, you'll start accruing interest on any unpaid balances on the card.

Offers purchase protection

Section 75 protection means that your credit card provider must protect a purchase that is more than £100 and less than £30,000, which is useful if there are problems such as faulty goods.

Take advantage of rewards

When you use a rewards credit card to make purchases, you can earn cashback with every purchase you make with that card. 

Representative example - most accepted customers get

Representative APR
29.9% APR (variable)
Purchase rate
29.9% p.a. (variable)
Based on a
credit limit
Annual fee
No annual fee

The approval of your application depends on your financial circumstances and borrowing history. The interest rates may differ from those shown.

You can find out more about what cashback means and how it works.

Credit cards have other benefits

Credit cards can come with benefits such as insurance and purchase protection. With BNPL, you will not receive these kinds of rewards or protections, nor do they always offer the credit-reporting benefits of credit cards.

Shop with a wider array of retailers

BNPL means you are stuck with retailers that offer this as a payment method. Credit cards, on the other hand, have better universal acceptance and work on all platforms. 

Credit cards are typically the better choice if you wish to shop at a wider array of retailers and for other purposes such as taxis and restaurants.

What’s next?

Whether you want to make a purchase or build your credit score, there’s a credit card that’s right for you. An extra bit of know-how can make all the difference when it comes to choosing a credit card, and Barclaycard are here to help.

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