Is “Buy Now, Pay Later” Safer than a Credit Card for Vacation Purchases?

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The answers you need may be hiding in the fine print.


key points

  • Buy Now, Pay Later (BNPL) services and credit cards both allow you to pay for purchases over time.
  • While they work a little differently, they have similar consequences for those who don’t pay.
  • One might be a better fit than the other depending on the situation.

Picture this: You confidently walk up to the checkout with a cart full of vacation purchases and pay for everything with cash. Then, once the day arrives, you watch your happy friends and family unwrap their presents while you rest comfortably, knowing the bill has already been paid. This is one Christmas miracle we could all get. But the reality is often not like this.

Sometimes, we need a little help with our vacation 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 one is right for you this year.

How credit cards work

Credit cards are the go-to option for many people who shop online because they are more secure than using debit cards. As long as you pay your bill in full at the end of the month, you’re good to go. You’ll only owe the amount you actually spent in the last month, and you may even earn some reward points that you can use for future purchases.

But things can get messy pretty quickly if you have to carry a balance. You will not incur any late fees as long as you make the minimum card payment. But the remaining balance will start accruing interest, and that can add up quickly.

Some credit cards charge annual percentage rates (APR) of more than 20%, causing your balance to grow rapidly. 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 services work Buy now, pay later

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

Then, you pay the rest in installments over time. The exact terms vary depending on the BNPL provider. Some charge interest, but some don’t as long as you keep up with your payments. Many people like the flexibility these services offer, but they can be as dangerous as credit cards if you ignore the terms.

Non-payments can lead to consequences, including:

  • Late parties
  • Interest expense on the remaining balance
  • Be reported to a collection agency

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

So which is better?

Ultimately, the best course of action for you depends on your personal situation. If you stay up to date with your payments, a credit card may be the best option. Not only does this let you shop just about anywhere, but the rewards you earn can help offset some of the cost of your items in the long run.

If you’re concerned about interest, a BNPL service may be better suited if you can find one with flexible terms and no interest rate. But not all retailers offer BNPL, and those that do often work with a specific vendor, so you may not be choosing which service to pay for.

Before making any decision, review all the options available to you and read up on their terms and conditions. Find out when you need to pay back what you owe and what could happen if you fall behind on your payments. So, choose the one that offers the fewest disadvantages.

Whichever method you choose, 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 shop at multiple retailers and use cards instead of cash. Keep your shopping list handy so you know how much extra room you have in your budget.

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