Buy Now Pay Later vs. Credit Cards: How Do They Compare in 2024?

Since the emergence of Buy Now Pay Later (or BNPL), there has been an ongoing debate about how it compares with traditional forms of borrowing ­– particularly credit cards. As the above infographic illustrates, there are plenty of advantages, disadvantages, and nuances to each payment method.

However, this debate may soon be rendered meaningless, given the gradual intertwining of traditional credit with BNPL. In recent years, most leading credit card companies – including Visa and Mastercard - have launched their own successful BNPL offerings, at the expense of established BNPL players such as Klarna and Afterpay.

These offerings not only enable banks and fintech companies to offer BNPL through shared rails, but enable consumers’ credit cards to function like BNPL. There are good examples of this:

• Chase Bank’s My Chase Plan, which enables consumers pay off purchases of $100 or more in monthly interest-free instalments for a fee.
• Citibank’s Citi Flex Pay, whereby purchases over $75 can be paid off in fixed payments for no fee, but with a fixed interest rate. These are also offered separately from the cards’ credit limits, meaning that borrowers still retain their usual traditional credit.

The success of these offerings comes from their approach of offering BNPL as a feature of the credit card, as opposed to being a wholly new product that exists outside of the card network like ‘traditional’ BNPL. On one hand, this adds additional fees and more rigorous (‘hard’) credit checks to what was previously a very laissez-faire process, but on the other, means borrowers benefit from consumer protection rules that traditionally didn’t apply to BNPL.

The success of these diverse approaches is yet to be fully understood, and only time will tell whether these offerings are successful because they offer something that Klarna, Afterpay, Zip et al. are failing to offer consumers – or whether, by virtue of being household names, they’re viewed as being a more ‘responsible’ version of BNPL.

Source: Buy Now Pay Later Market 2024-2028

Latest Press Release: BNPL Transaction Value to Rise 106% Globally by 2028; Catalysed by Regulatory Breakthroughs and Increased B2B Use

Download the Whitepaper: Buy Now, Problems Later? The Challenges of BNPL

Read the Blog: Buy Now Pay Later Fraud: A Growing Risk for Loan Providers