Exploring BNPL with Credit Cards: Is It Handy or Expensive?

Is the approach of utilizing buy now, pay later with your credit card effective, or could it lead to financial pitfalls? Discover the answer today!

Is Using BNPL with Your Credit Card Smart?

The concept of buying now and paying later has long been enticing, particularly for larger purchases—this approach is known as BNPL (buy now, pay later).

Originally brought to fame by services like Affirm, Klarna, and Afterpay, this model is now making waves in… credit cards.

But is this truly a convenience or a hidden trap? Let’s explore.

What’s the Process of BNPL on a Credit Card?

Picture this: you just purchased a new $800 phone using your credit card.

On your bill, along with the usual choices to pay in full or carry a balance with interest, a new option appears: divide this purchase into 6 fixed payments of $140 with a clear fee. That’s BNPL integrated into your card.

Companies like American Express, Chase, and Citi are already rolling out such programs.

For instance, Amex features Plan It, which allows you to split purchases over a certain amount with upfront fees—no surprises at the month’s end. Citi provides Flex Pay, while Chase offers My Chase Plan.

The Upside: Control, Predictability, and Lower Interest

The primary advantage is transparency, as BNPL on credit cards provides a clear forecast of your monthly payments for that purchase, aiding your financial planning.

Typically, the interest rates are lower than the card’s normal APR, which can soar above 20%.

In certain instances, you might even encounter zero-interest offers, particularly for purchases at specific partners or during promotional events.

Another benefit is flexibility; you can select which purchases to split and utilize this option only when it truly makes sense.

The Downsides: Hidden Risks and Gradual Accumulation

Using BNPL on your card can create a false sense of control. Rather than asking, “Can I afford this now?” you may shift to thinking, “What will my monthly payment look like?” and therein lies the risk.

As you add up various installments, your statement can quickly become overwhelmed with prior commitments, leaving little room for any new purchases.

Regardless of your perspective, BNPL is fundamentally debt. If you already have other installment obligations, you might find yourself facing multiple overlapping payments, which can strain your finances and raise the chances of falling behind.

Moreover, there’s the potential impact on your credit score. Dividing purchases can alter your credit utilization ratio, and depending on the service, the issuer might conduct a “hard pull” on your credit report.

BNPL or standalone apps?

BNPL on the card goes head-to-head with apps like Afterpay, Klarna, and Affirm. These platforms share a similar framework but typically cater to online shopping and short-term installment plans (like 4x interest-free).

The benefit of using the card is that you don’t need another app or approval for each transaction.

Everything you need is accessible in your bank or card application. However, some apps may provide better terms or unique promotions with partners—so it’s wise to compare options.

When is BNPL on the card beneficial?

Take a look at scenarios where BNPL on the card could be advantageous:

You need to buy a high-value item (like an appliance) and prefer fixed payments.
The fee is lower than your card’s APR and fits your budget.
You can manage future payments and aren’t close to your card’s limit.
The purchase is well-planned, not impulsive.

Final advice: use it wisely

Like a credit card, BNPL can either be your best friend or your worst enemy—its effectiveness hinges on your usage.
It’s not a magical fix, but it can be a handy resource if approached with strategy.

Before you start with an installment plan, consider:

Do I truly need this right now?
Can I manage the full payment without straining my budget?
Will breaking up the payments help or just delay a financial issue?

When your responses are genuine and optimistic, using BNPL on your card can be advantageous. However, if it merely serves as a method to overspend, it might be wise to pause, set the card aside, and reconsider.