What’s the Difference Between BNPL and Credit Cards?
BNPL apps and credit cards have one main similarity: Both allow customers to pay off a purchase over a period of time with periodic installments. However, significant differences do exist between two payment options. One major difference is that BNPL apps are only accepted by specific retailer-lenders, whereas credit cards are far more widely accepted.
Credit cards give cardholders a minimum monthly payment that may or may not be fixed. Cardholders can choose a timeframe to pay off purchases but will be charged interest monthly if the entire balance is not paid down by the end of a billing cycle.
Many BNPL apps issue loans with fixed payment installments for every purchase. Some may not charge any interest or late fees, but each service differs.
There are, of course, pros and cons to everything:
Credit Card Pros
- Minimum monthly payments can be paid off over a longer period of time, though we never recommend carrying a balance
- Can be used for nearly any type of purchase, including retailers, gas stations, grocery stores, bills and more
- Potential to earn rewards, like points, miles or cash back
- Potential to benefit from other perks, like welcome bonuses or rental car collision damage insurance
- Opportunity to improve credit score with responsible spending
Credit Card Cons
- Application process can take longer
- Interest accrues if purchases are not paid off in full by the end of each monthly billing cycle. We never recommend carrying a balance if it can be avoided
- Applying for a credit card typically results in a hard credit check (which can negatively impact credit scores)
- Fees may include annual fees, foreign transaction fees and late payment fees
BNPL Pros
- Fixed monthly installments (sometimes with no interest)
- Choose-your-own payment frequency
- Can get instant approval and apply it to purchases right away
- Hard credit checks not always required
BNPL Cons
- No reward potential
- Only accepted by some retailers
- May be charged interest on purchases or late fees for late payments
- More difficult to increase credit score with responsible spending
