Credit Cards

Buy now, pay later Credit cards: what you need to know before making a decision


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If you’re already a fan of Buy Now, Pay Later (BNPL) services, BNPL credit card options make it even easier to finance your purchases with in-store and online installments.

The services already work as an alternative to credit cards: when you make a purchase online, you can sign up for a plan to reduce the cost in a few weekly, bi-weekly or monthly installments with fixed payments and fees.

BNPL services from companies like Affirm, Afterpay and Klarna are booming. According to Adobe analysis published in March, BNPL online orders increased 528% in October and November 2020 compared to the previous year. Demand also continues to grow, with online orders up 53% year-over-year in recent months.

Now, some BNPL companies are expanding their offerings with credit cards that also make it easy to use BNPL for in-store purchases.

Additionally, many popular credit card issuers have implemented their own BNPL services. Issuers like American Express, Citi, Chase and more allow eligible cardholders to enroll card purchases in installment plans that work similarly to third-party services.

Some experts are already skeptical about the costs and potential risks associated with BNPL, and the opportunity to use them for in-store purchases, as well as online, may only increase the chances of overspending or taking on potential charges. Here’s what you need to know about using a Buy Now, Pay Later plan with a credit card before you sign up:

What are Buy Now Pay Later cards?

Like BNPL’s installment plans for online spending, BNPL cards allow cardholders to pay for purchases in interest-free installments. But with the card, you can also enroll in-store purchases in BNPL plans.

Earlier this year, Klarna announced a waiting list for the Klarna Card, a physical Visa card that will allow cardholders to pay for any purchase online or in-store over time in four payments, similar to plans. Klarna buy now pay later discounts.

The Klarna card will be a Visa card issued by WebBank. You can use the card to pay for any purchase in store or online with Klarna’s “Pay in 4” plan and a bi-weekly payment schedule. Instead of a credit limit, you will be assigned a purchasing power when you are approved, which will be reassessed with each purchase.

In February 2021, Affirm also opened a waiting list for its Affirm Debit+ card. The card is linked to an existing checking account and can be used to split any eligible online or in-store purchase within 24 hours of the transaction into four interest-free payments due every two weeks.

Card risks Buy now, pay later

However, like any buy now, pay later plan, these card options come with risks. Payments can be interest-free, but if you pay late or don’t pay your balance in full during the payment period, you can incur very high fees and even affect your credit score. Each company has its own terms that you should be aware of before signing up.

One of the biggest risks of BNPL is the overspending caused by the instant purchase gratification. “When losses go on for weeks or months, they seem less,” she previously shared with NextAdvisor Carrie Rattle, a financial therapist in New York who focuses on over-buying. “Their [a] perception of greater affordability that is not the reality,” he says.

And because in-person options make spending more than you can afford using BNPL even easier, you could be at even greater risk of falling behind on payments due to overspending. When cardholders choose to finance the essentials, it can be challenging to budget and keep up with payments.

“It’s less ‘Do you want to buy a Peloton bike for $50 a month for 43 months?’ and more ‘Do you want to buy groceries with this? Do you want to buy your morning cup of coffee with this?’” says Ted Rossman, senior industry analyst at CreditCards.com. Like NextAdvisor, CreditCards.com is owned by Red Ventures.

Serviced credit cards Buy now, pay later

In recent years, several major credit card issuers have started offering their own BNPL options. You may be able to pay for store purchases with installment plans using a card you already have in your wallet.

For example, with the Plan It option of Amex’s Pay It Plan It feature, you can enroll eligible purchases of $100 or more in an interest-free installment plan and pay it off in monthly payments for a flat monthly rate. Chase’s version of BNPL is called My Chase Plan. It also gives cardholders the option to pay for purchases of $100 or more in installments for a flat monthly fee. Both plans offer different terms with different time periods and rates that you can choose from.

Citi’s option, Citi Flex Pay, is a bit different. It’s available for purchases of $75 or more and charges interest, but the rate is fixed and may be lower than your card’s normal APR.

If you’re already used to paying your monthly credit card bill, signing up for a fixed-payment plan through the card could help you pay for your purchases over time without adding a separate monthly bill that you’ll have to remember to pay. Additionally, the minimum requirement to enroll in the plans can help you avoid some of the overspending risks associated with BNPL.

However, these plans can also incur interest and penalties if you miss a payment or complete the plan on time, and can also affect your credit score when the issuer reports late or missed payments to the credit bureaus. Like any credit card purchase or installment plan, make sure you have a plan to pay for your purchase within the terms of your plan before you sign up.

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Buy now, pay later against credit cards

If you’re deciding between using a credit card or buying now, paying later for a future purchase, the most important thing to consider is financing terms, experts say. It doesn’t matter if you’re paying off a credit card balance or BNPL dues, debt is debt. And debt can get expensive quickly.

“Consumers just don’t understand sometimes what they’re getting into,” Bill Butler, CEO of Kachinga, an AI-powered financial education platform for kids. “They are ready to make their purchase and they want to do it fast. But paying attention to the terms is very important when they make that decision.”

The best way to choose, Rossman suggests, is to compare terms and find the best deal.

For example, let’s say you want to make a $500 purchase and pay for it in installments. Here’s the difference between using a Chase card with a My Chase 6 installment plan or a Klarna Pay in 4 plan, since you pay each installment on time and in full:

My plan of pursuit Klarna Payment in 4 Plan
time to pay 6 months (monthly payments) 6 weeks (biweekly payments)
Fee $13.38 $0
Number of payments 6 4
Amount of each payment $85.57 $125
Total cost $513.38 $500

In this case, the Chase Plan costs marginally more, but offers a longer six-month payment period. If you have the cash to pay off your balance in just six weeks, paying $125 every two weeks, you can save a little more by using the Klarna plan. Otherwise, the Chase Plan may offer more flexibility for your payments over a longer period of time.

pro tip

For longer interest-free financing, consider a 0% APR credit card. Some of the best 0% introductory terms available today offer up to 21 months interest-free on new purchases.

Of course, if you miss a payment or don’t pay in full within the plan period, the cost becomes much higher. Whether through a BNPL third-party service or your credit card issuer, missed payments or failure to pay for your purchase in full may result in additional interest, fees, and penalties.

Another thing to consider is the opportunity to earn rewards. If you already have a great rewards credit card, you can earn cash back or rewards points on your purchase. As long as you can pay off your balance in full without charging interest, consider the rewards you could benefit from before you make your purchase.

The Future of Buy Now, Pay Later

With BNPL providers moving to cards and card issuers offering their own versions of BNPL, it seems that installment plans for your expenses are here to stay. But some experts believe we are only at the beginning of what call options will look like in the future.

In the short term, you will likely see more and more retailers integrate with BNPL options, predicts Ahon Sarkar, general manager of Helix, a banking-as-a-service (BaaS) platform behind a variety of popular fintech products. As competition grows, BNPL companies could begin to provide “specialty hooks,” additional incentives like discounts to encourage brand loyalty, and integrate with credit-building tools.

Rossman and Butler agree that BNPL will likely expand beyond retail, specifically, into travel, medical, dental and veterinary services. “I think there’s a lot of market for predictable term financing with lower rates, because all of that is expensive,” says Rossman. “And right now there aren’t many alternatives.”

Eventually, the lines between different types of credit, including credit cards and BNPL, will begin to blur, Sarkar predicts, giving way to customized hybrid credit solutions.

“You’ll start to see how the way we interact with credit as a society changes a little bit,” he says. “I think you’ll see these different credit instruments become more interchangeable… Over time, you’ll start to see these things become personalized to each user.”

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