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Credit cards versus buy-now-pay-later: When to use each

Calendar with reminder to make a payment and a stack of credit cards.
What are the pros and cons BNPL versus credit cards (Source: Getty)

Aussies prefer to use credit cards for any purchase over $100 as opposed to buy-now-pay-later (BNPL), according to new research, but there are pros and cons for both.

The research from Finder found that 44 per cent of Aussies prefer to use credit cards when making a purchase over $100, more than double than those who use BNPL (20 per cent).

The remainder (36 per cent) either use their debit card or cash.

Finder credit card expert Amy Bradney-George says regardless of the choice between credit cards and BNPL, customers should always be careful not to overextend themselves with credit.

“BNPL is so enticing because it’s interest-free and easy to get when you’re already shopping. It takes advantage of consumers’ growing need for instant gratification and the fear of missing out,” she said.

Here we take a look at the pros and cons for each option.

Why choose BNPL?


With BNPL there is no interest so long as you make your purchases on time, which is a very attractive prospect to some consumers.

Another big reason consumers use BNPL is because of the ease of sign up. Unlike credit cards, it can be as simple as just making an account with the BNPL service so you don't have to go through a whole application process.

According to the Finder research the majority of people (51 per cent) who use BNPL do so because of the ease of signing up.


While BNPL options don’t have interest, the late fees from missing a payment can be more expensive than paying interest.

A report from ASIC found one in five (21 per cent) BNPL customers ended up paying late fees.

Nearly half of those (47 per cent) were between the ages of 18 and 29.

ASIC found that 20 per cent of BNPL customers cut back or went without essentials such as meals in order to meet their repayments on time.

“BNPL might be a great option if you’re confident you can meet your repayments on time, but just a few late fees can stack up quickly,” Bradney-George said.

“While most BNPL providers cap their late fees, consumers could still end up paying more than they would with a credit card.”

Why choose credit cards?


Credit cards can offer more flexibility in terms of how much you repay and aren’t limited to specific retailers in the way BNPL sometimes are.

“You can use a credit card on anything from your energy bill to a new dress,” Bradney-George said.

“There are interest-free credit cards for people worried about their debt growing to monstrous proportions overnight. These cards offer 0 per cent interest for an introductory period or on an ongoing basis.”

Additionally, there are a range of credit card options available that can offer different perks.

The majority of credit card users (59 per cent) said rewards and points offered with certain credit cards is what makes them choose them over BNPL.

Credit cards also allow you to build up a good credit score, if repayments are made on time.

This can make you more appealing to a lender for bigger purchases like a car or a home if you have shown you are good with making repayments.


With more flexibility comes some more risk if you don’t keep track of your spending and credit card debt can be very stressful and difficult to get out of.

On top of this, credit cards often come with fees which can add to your financial stress if it gets out of control, Canstar research said.

“Credit cards can also come with a range of fees such as annual fees, late payment fees, international transaction fees, cash advance fees and balance transfer fees,” Canstar said.

“Some lenders do offer cards with no annual fees, but if you are considering a rewards credit card, this will typically come with a higher annual fee.”

Additionally, as mentioned before the application process can be a little tedious if you’re only looking to make a small purchase that you are confident you can pay off in instalments.

Tips for making the right decision

Bradney-George said it comes down to personal circumstances so it’s always best to do your research.

For BNPL, make sure to read the terms of conditions of the service before signing up to fully understand the payment terms and fees.

For credit cards, make sure you consider the options available and find the right card to suit your needs.

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