BNPL vs. credit cards: What’s the difference?

Buy now, pay later — ’BNPL’ — is a flexible payment method offered by providers like AfterPay, Zip and Klarna that has grown in popularity. BNPL works like to a credit card, but they aren’t the same. While both are a form of credit, comparing BNPL vs credit cards comes down to how consumers make purchases and repayments.

What’s the difference between BNPL and credit cards?

BNPL and credit cards are both financial tools that allow shoppers to make purchases and delay payment, but repayments are structured differently.

BNPL services allow shoppers to pay for a transaction in instalments rather than in total upfront. They typically only finance a single purchase at a time but offer a structured schedule of fixed repayments and charge little to no interest. Think of BNPL as a micro debt you pay off in predictable instalments.
Credit cards allow shoppers to pay for multiple transactions through a revolving line of credit with variable interest rates. They are more flexible, which can lead to unpredictable statement balances and out-of-control credit card debt. Think of credit cards as a combination of many debts you can repay over time.

🤓 Nerdy Tip

BNPL repayments are generally easier to budget and plan for, but you can still get into debt. On average, individuals are racking up debts of approximately $2,200 for BNPL transactions.[1]

BNPL vs credit cards — other key differences

Providers

BNPL: Third-party service providers usually offer these plans. However, some banks are also increasingly offering their own versions of BNPL-style instalment plans.

Credit cards: Generally offered by banks and major credit card companies in Australia.

Eligibility and approvals

BNPL: You must be at least 18 years old, reside in Australia, hold a valid Australian bank payment card and can verify an email address and phone number. Approvals are instant or done within minutes, with a starting spending limit of $600. AfterPay, for example, doesn’t conduct credit checks.

Credit cards: Eligibility depends on the type of credit card you choose. Most banks will require proof of income, current outstanding debts and financial obligations, and they will conduct a credit check.

Credit score

BNPL: While BNPL companies might not check your credit score, using these products can hinder that score.

Credit cards: All credit card usage can impact your credit score, both positively and negatively. You can strategically use a credit card to boost your score — paying bills on time and in full.

🤓 Nerdy Tip

BNPL is new but growing. Over six million Australians[2] — a quarter of the population — now use BNPL. As a result, the Australian Government has announced plans to regulate BNPL services. Planned rules will include providers needing to carry out background checks before lending.

Interest and fees

BNPL: Often advertised as zero-interest, complex fee structures can catch out consumers. There are possible late fees ($5 – $15), establishment fees (up to $110), account-keeping fees (up to $10 a month), and payment processing fees ($3 per payment). Like banks, BNPL fees differ between companies.

Credit cards: Cards have monthly or annual fees, set interest rates and an interest-free period available.

» MORE: How to calculate credit card interest

Consumer protections

BNPL: The Given Buy Now Pay Later sector isn’t currently regulated as credit.

Credit cards: There are regulatory frameworks in place for credit cards. These protect consumers from predatory lending and provide insurance on purchases when using a credit card. Credit cards also come with fraud protection.

Usage

BNPL: While many retailers offer BNPL as a payment option, primarily online, it’s not as commonly accepted as credit cards. For example, you won’t be able to use it to pay utility bills, buy food or pay for services like hairdressing.

Credit cards: You can use them anywhere they are accepted when you have credit available — even to pay rent.

Rewards points

BNPL: Some BNPL providers might have a points program, such as AfterPay’s Pulse Points, but they aren’t as universal and comprehensive as rewards and points offered by credit cards.

Credit cards: For rewards credit cards, you can accrue frequent flyer points with an affiliated airline.

How to choose which is right for you

When choosing between BNPL vs. credit cards, there are three options to consider:

Buy Now Pay Later — plans are available through major providers like AfterPay, Zip and Klarna.
Buy Now Pay Later credit cards — such as the Humm90 Platinum Mastercard.
Standard bank credit cards — like those offered by the Big Four banks.

However, most people will use either a BNPL provider or a standard credit card. So, for an example, let’s compare AfterPay with a Westpac credit card.

Comparison example: AfterPay vs. credit card

If you use AfterPay, your purchase gets split into four payments, payable every two weeks. There are no upfront fees or interest charges, but you’ll incur late fees on failed scheduled payments — 25% of the total orders below $40 and a $10 late fee on orders exceeding $40. Partial late fees also start to accrue seven days after the due date. This fee structure continues until the 25% cap is reached or the maximum $68 charge.

In other words, if you miss a payment and you have BNPL debts with multiple providers, it’s easy to get in over your head.

If you use your credit card for that same transaction, you can leverage the interest-free period (usually 55 days). You only need to remember two data points — how much your statement costs to pay in full and when it’s due. However, there are standard fees, as with all credit cards.

When BNPL does (and doesn’t) make sense

Check the provider’s terms to see if a BNPL service makes sense.

BNPL might make sense if you can guarantee you’ll repay on time to avoid interest and fees. If you have savings in another account (that you don’t want to touch) and your next pay is coming in before the due date, BNPL could be a viable payment alternative.
BNPL probably doesn’t make sense if you’re having trouble paying off a credit card. It’s especially best to avoid BNPL if you plan to use it because you don’t have the money or have a habit of forgetting or missing bill due dates.

If you aren’t sure and still want to try BNPL, don’t use more than one service at a time.

The verdict:

As with all aspects of personal finance, it comes down to how you use it. BNPL could be a financial enabler for some but a detriment for others.

If you’re already in debt, focus on getting a handle on your finances before you explore other payment options. If you’re confident and in control of your finances, you could try BNPL for one purchase and see if it helps you — or simply adds another layer of unnecessary stress to your financial situation.

Yes, you can use a credit card to pay your BNPL bill. Simply add your credit card as the payment method when completing the transaction. Remember, you’re paying one debt off with another, so be wary of this method and always aim to settle bills with savings.

BNPL has become popular for its convenience. If you’re shopping online, you’ll likely see the total cost and a BNPL alternative such as ‘make four interest-free payments of $XX fortnightly with AfterPay and Klarna.’ Select the BNPL provider at checkout, and you’ll be redirected to their website to complete the purchase.