Why Pay Later Already Comes Standard on Many Credit Cards

Consumers are increasingly opting to "buy now, pay later" (BNPL). Over time, paying for things in multiple interest-free instalments is a perk of POS instalment loans, which consumers may use both online and in stores. Sixty per cent of consumers have used a purchase now, pay later service at some point, and as of April 2021, 46 per cent were making at least one payment through a BNPL agreement.

Customers can make purchases immediately and spread the payment across multiple instalments with buy now, pay later programmes. Customers can make payments over time with credit cards, with only the minimum amount due each month being mandatory.

Considering the individual's financial status while weighing the benefits and drawbacks of BNPL plans and credit cards is essential.

What is Buy Now, Pay Later?

It's a form of short-term financing that allows you to make a purchase immediately and then make the payment later. Except for late fees for nonpayment, BNPL plans typically do not impose interest or other costs. Many financial institutions present their clients with these instalment loans at the time of sale.

Plan-by-plan variations in the kind of big retailers who accept Sezzle BNPL are possible. For those that qualify, several credit card issuers like American Express even let you make payments over time. Although there are some commonalities among these plans, each buys now, pay later service has been twisted.

In the case of BNPL loans, for instance, a down payment of as much as 25% of the total purchase price is customarily expected. After that, you'll have to make regular payments over the following weeks or months to settle the rest of the bill. BNPL programmes limit borrowers to making only four instalments, while others provide them complete freedom in determining their repayment terms.

Fifty-one per cent of Americans used a buy now, pay later service at least once in 2020 or 2021 when the pandemic was at its worst. Clothes, furnishings, appliances, electronics, homewares, and makeup were among the most often purchased categories.

Distinguishing Features of Varying Credit Cards

Credit cards are a form of "buy now, pay later" financing that can be used at stores. However, they can be put toward the purchase of gas, the payment of bills, and other costs. No interest will be charged if the monthly balance is paid in whole by the due date. If they don't pay off their balance in full each month, interest charges based on the APR will be applied (APR).

Penalties for late payments

An example of revolving credit is a credit card. Your borrowing power is limited by the credit limit specified in the agreement. You will have less available credit when transactions with your credit card. Making a payment increases your available credit.

Credit Cards vs Buy Now, Pay Later: Which Is Better? When shopping online or in-store, you can use a buy now, pay later plan or a credit card to spread out the cost of your purchase. However, there are also drawbacks to each option.

The Benefits of Making a Deferred Purchase It's easy to go overboard with payment plans because you don't have to pay the total amount right once. The risk of your credit score dropping due to missed or late payments is real. To clarify, not all stores offer layaway plans.

Acceptance of Credit Card Payments Cons If you roll over an amount from one month to the next, interest charges will accumulate quickly. Eligibility is usually contingent upon passing a strict credit check. One's credit rating can take a severe hit from overdue payments. There are a variety of fees that credit cards can levy that can significantly increase your total bill.

Guarantees and returns

The impact of a buy now, pay later deal on your credit score should also be considered. Many BNPL companies do a mild credit check to accept shoppers for loans, but if you're late on payments, the company will still report it to a credit bureau, which could hurt your score.

Loans from BNPLs, like credit cards, can only harm credit scores if they are repaid on time. As a bonus, having at least one credit card is applicable even when "buy now, pay later" isn't an option. For instance, flight and automobile rental reservations typically necessitate using a credit card. Finally, if you are interested in credit card rewards programmes, look at Investopedia's comprehensive and continually updated list of the best rewards credit cards.

(Writer : Triston Martin)