If you are a frequent online shopper, you probably would have noticed the “buy now, pay later” payment method when you check out. With India moving towards a cashless economy, Buy Now, Pay Later (BNPL) services have become increasingly popular in recent years. 

BNPL services find many takers, especially among the younger generation and older folks who are hesitant to use credit cards. A recent market study reveals that 67% of millennials don’t own a credit card. This is because they are either not approved for credit cards or prefer to avoid credit altogether. Many are reluctant to use credit cards, as they have heard stories of credit card debts from their parents. 

So, which one is better? BNPL or the good old trusted credit card? The short answer is it depends on your financial situation. For the long answer, continue reading. Before we compare both options, here’s a quick introduction to how BNPL and credit cards work, as well as their pros and cons. 

What is a credit card? Pros and Cons 

A credit card is a popular payment option issued by banks and financial service providers. It is a thin plastic or metal card that comes with a pre-set revolving credit limit. The cardholder can use the card to pay for purchases up to the specified limit. Borrowers repay the borrowed money, plus interest (if any) and other charges (if any), either in full or partly on the next billing date. 

Related: Personal Finance Lessons for Millennials: Credit Cards 101

Pros of Credit Cards

  • Boosts your purchasing power – you can buy now and pay later 
  • It helps to improve your credit score and builds a positive credit history 
  • Provides reward points, bonuses and other benefits
  • Highly secure and safer to use than cash 
  • Offers value-added benefits like complimentary airport lounge access, discounts at retailers, fuel discounts, etc. 

Cons of Credit Cards

  • Can lead to overspending, if you are not careful
  • The interest charges and other fees increase substantially if payments are not made on time 

What is a Buy Now, Pay Later Scheme? Pros and Cons 

Buy now, pay later (BNPL) is a short-term financing scheme offered for consumer purchases. BNPL allows you to purchase an item right away and pay for it later in the form of monthly EMIs. BNPL schemes have gained popularity due to easy availability. Most of the top online retailers include Amazon, Flipkart, Myntra, and BNPL as a payment choice. 

Pros of Buy now, Pay Later

  • Convenient: It is integrated with a store’s checkout option providing a quick and easy payment option
  • Fast, easy set-up and immediate approval
  • Interest-free: however, keep in mind that not all BNPL schemes are interest-free
  • Easy repayment options in the form of EMIs or other flexible repayment plans

Cons of Buy now, Pay Later

  • Encourages impulse spending, making you buy things that you wouldn’t usually buy when paying out of pocket
  • Late payment fees are steep 
  • You cannot decide the repayment frequency – the retailer fixes it

Now, let’s compare these two digital payment facilities on three key factors:

  1. To Improve your Credit Score 

Winner: Credit Cards 

Using a credit card regularly, paying the credit card bills on time and in full is one of the easiest ways to build your credit score and boost your credit history. If you’re planning to take a bigger loan in the future, like a car loan or a home loan, then having a good credit score will improve your chances of eligibility. Additionally, a good credit score will help secure loans at the best interest rates, reducing your overall loan burden. 

Additional Reading : What Is A “Pay Later” Service & Can A Pay Later Purchase Impact My Credit Score

With that said, just because you have a credit card, your credit score will not magically improve. You have to ensure that you use it responsibly by avoiding late payments, staying within the available credit limit, and keeping the credit utilisation rate low. 

BNPL payments, on the other hand, are not usually reported to credit bureaus. However, if you fail to make the payment, it gets reported to credit bureaus and hurts your credit score. 

To summarise, credit cards have the potential to help you build your credit score, provided you use them responsibly. On the other hand, BNPL payments do not help in improving your credit score. However, if you fail to make the payments on time, it can drag down your score. 

Related: How can a credit card help in improving your credit score

  1. Ease of Approval

Winner: Buy Now, Pay Later 

One of the biggest draws of Buy Now, Pay Later is that it doesn’t require credit approval, and no credit check is done. If you have a poor credit score or no credit score, then this is a good choice. Also, if you’re planning for a bigger loan and wish to keep your credit utilisation low, then opting for Buy Now Pay Later is a better choice as it doesn’t impact your credit score. 

Choosing BNPL while checking out is convenient, as you don’t have to fill in a lengthy application or go through multiple stages of approval. With that said, just because BNPL is readily available, it doesn’t mean it’s the right choice. Using BNPL for unnecessary purchases can lead to a cash crunch and topple your monthly budget.

Related: 10 Easy Ways to Get a Credit Card without Income Proof

  1. Interest Charges

Winner: Tie, with a slight preference for credit cards

The interest charges for BNPL vary depending on the provider. While some BNPL services do not charge any interest, others charge steep interest rates up to 45% or even more. However, keep in mind that all BNPL services levy late payment penalties when you don’t repay the amount on time. So, if you opt for the BNPL service, it’s highly recommended that you set up auto-pay to avoid missing the payments. 

When it comes to credit cards, you are notified of the interest charges at the time of card issue. However, remember that credit cards do not levy interest when you pay the due amount within the payment due date. You usually get around 30 to 45 days of the interest-free grace period. By settling the outstanding by the due date, you are not charged any interest. 

Which is the winner? Credit cards or BNPL? 

Ideally, it’s a good financial habit to save enough money to pay for purchases upfront. However, practically that isn’t always possible. 

If you want to boost your purchasing power while earning reward points, discounts and other value-added benefits, then credit cards are an excellent choice. Also, they help you build your credit score and credit history over time. Having one or two credit cards in your wallet enables you to use them when BNPL schemes do not apply. If you are on the lookout for a new credit card, check out CreditMantri’s list of the top credit cards to find the right one for you. 

Buy now pay later, on the other hand, can occasionally be used depending on availability and offers. However, before you go for BNPL, make sure to understand the terms and conditions so that you can repay on time to avoid interest charges and other penalties. 



  1. Does Buy Now, Pay Later affect my credit score? 

BNPL is a type of credit. So, like all other methods of credit, if you fail to repay it on time, it is noted in your credit report, causing your credit score to drop. 

  1. Why am I not eligible for Buy now, pay, later? 

Since Buy now, pay later is a type of credit, different lenders have various eligibility criteria. One of the main reasons why you were not approved for BNPL could be your low credit score. Check your credit score and work on improving it to be eligible for BNPL schemes in the future. 

  1. What are the alternatives to BNPL? 

The best alternative to BNPL is to use your credit card. A credit card comes with a bigger limit than BNPL, helping you pay for bigger purchases. 

  1. What are the repayment options in BNPL? 

You can choose to repay the total amount after 15/30 days or pay the borrowed amount as 3/6/9/12 month EMIs. 

  1. What are the drawbacks of BNPL? 

Not all purchases are eligible for BNPL. Also, the amount of financing available with BNPL is limited, making them unsuitable for large purchases. Some retailers charge steep interest on BNPL, making them an expensive payment option.