Buy Now Pay Later vs Credit Card: Which One To Pick?

Intro

Millions of Australians use buy now pay later (BNPL) services each year — but that doesn’t automatically mean it’s the cheapest or best option compared to a credit card.

Both credit cards and BNPL let you pay for purchases in instalments. They can help you manage your cash flow, but each comes with different fees, benefits, and risks.

In this article, we break down the key differences between BNPL and credit cards to help you make a more informed choice. We’ll also explore Credit24 personal loans as an alternative option to consider.

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What is buy now pay later (BNPL)?

Buy now pay later (BNPL) is a payment service that lets you split a purchase into smaller instalments, usually over a short period.

Here’s how it works:

• Typically lets you pay in 4 equal instalments over 6 to 8 weeks
• Standard plans are often interest-free if repayments are made on time
• Late fees may apply if you miss a repayment
• Fast sign-up process (though checks may vary between providers)
• Commonly available at checkout with online and in-store retailers

BNPL has grown rapidly in Australia, with millions of Australians using these services for everyday purchases. BNPL can be used in-store or online, depending on whether the retailer offers it.

Popular Australian BNPL providers (2025):

• Afterpay
  One of Australia’s best-known BNPL providers, widely accepted across retail and lifestyle sectors
• Zip
  Offers “Pay in 4” options as well as longer-term products for larger purchases
• Klarna
  Popular globally and growing in Australia, with a strong app-based experience
• Humm
  Offers different repayment options depending on the purchase amount
• Bundll
  Offers flexible repayments and can be used more broadly via a linked Mastercard

What is a credit card?

A credit card lets you borrow money up to a set limit to pay for things now and repay later. Credit cards are widely used in Australia, and they can generally be used in-store or online, both locally and overseas.

Here’s how it works:

• Interest is usually charged if you don’t pay off the full balance
• Some credit cards offer up to 55 days interest-free on purchases — but only if you pay the full closing balance by the due date each month
• When you apply, the lender usually checks your credit history and asks for proof of income
• Accepted at most stores or websites that support card networks like Visa, Mastercard, or Amex
• Some cards also come with extras like rewards points, purchase protection, or travel insurance

BNPL vs credit card: Key differences

Application and approval process

BNPL:
Signing up for BNPL is often quick and straightforward, and it can take only a few minutes. Some providers may run limited checks depending on their policies and the type of product offered. In some cases, approval may be assessed purchase-by-purchase based on your account history.

It’s also important to note that BNPL regulation in Australia is changing, which may result in more consistent credit checks and affordability assessments across providers.

Credit cards:
Getting a credit card usually takes longer. You’ll need to complete a full application, and the lender will check your credit score and ask for proof of income or employment. Approval may take a few days. If you want a higher credit limit or premium rewards, you’ll usually need a stronger credit history.

BNPL vs credit card: how widely can you use them?

BNPL:
BNPL is generally available only at retailers that partner with a BNPL provider. This means you may not be able to use it everywhere. Some BNPL apps offer virtual cards, which can allow broader use, including with online retailers or through digital wallets. In-store, some providers also allow payment via QR code.

Credit cards:
Credit cards can generally be used almost anywhere in Australia or overseas, as long as the store accepts your card network (like Visa, Mastercard, or Amex). They’re accepted for most types of purchases — from groceries to travel — up to your approved credit limit.

Interest rates and fees

BNPL:
Most standard “Pay in 4” BNPL plans are interest-free if repayments are made on time. However, late fees may apply if you miss a payment, and these fees can increase the total cost of the purchase.

Some BNPL providers also offer longer-term instalment products, which may include interest charges, monthly account fees, or other fees depending on the provider and the product.

Because BNPL fees and terms can vary significantly, it’s important to review the provider’s fees and repayment schedule before committing.

Credit cards:
Credit cards usually charge interest on any unpaid balance. Interest rates vary by provider and card type, and they are often in the mid-to-high teen range.

Other fees may include:

• Annual fees (which can range from low-fee cards to premium cards)
• Late payment fees
• Foreign transaction fees for overseas purchases
• Balance transfer fees

Some cards also offer up to 55 days interest-free on purchases, but only if you pay the full closing balance by the due date each month.

Pros and cons of BNPL

Pros:

• Interest-free on standard plans
  Many “Pay in 4” BNPL plans don’t charge interest if you pay on time.
• Fast and easy sign-up
  Applications are usually quick, and approval can often happen within minutes.
• Convenient at checkout
  BNPL is built into many online and in-store checkouts, making it easy to use.
• Regular repayments
  Repayments are often made fortnightly, which may suit some people’s pay cycle.
• Clear repayment schedule
  You can usually see repayment dates and amounts upfront.
• May be accessible for people with limited credit history
  Some BNPL providers have simpler approval criteria compared to traditional credit products.

Cons:

• Can lead to overspending
  Smaller instalments can make purchases feel more affordable than they really are.
• Late fees can add up
  Missing repayments may result in fees that increase the total cost.
• Not accepted everywhere
  BNPL may only be available at certain retailers.
• Could affect your credit file
  Some providers report to credit agencies, and missed payments may impact your credit profile.
• May impact loan applications
  Multiple BNPL repayments may be considered when lenders assess affordability.
• Doesn’t always help your credit score
  Paying on time may not always build a positive credit history, depending on the provider.
• Fewer protections
  BNPL may not offer the same protections that credit cards provide (such as chargebacks).
• Refunds can take longer
  Refunds may be more complicated if instalments have already been processed.

Pros and cons of credit cards

Pros:

• Accepted almost everywhere
  Credit cards can be used in-store, online, and overseas.
• May help build your credit history
  Paying on time can help demonstrate responsible credit management.
• Perks and rewards
  Some cards offer rewards points, cashback, or frequent flyer programs.
• Added protections
  Credit cards often provide fraud monitoring and dispute processes.
• Extra benefits on some cards
  Some include travel insurance, purchase protection, or extended warranties.
• Interest-free days
  If you pay your balance in full, you may avoid interest on purchases.
• Useful in emergencies
  A credit card may help cover unexpected costs when cash isn’t available.

Cons:

• Interest can be expensive
  If you don’t repay the full balance, interest charges may apply.
• Fees may apply
  These can include annual fees, late fees, foreign transaction fees, or balance transfer fees.
• Harder to qualify for
  Approval usually requires a credit check and proof of income.
• Can lead to long-term debt
  Carrying a balance over time can lead to ongoing interest costs.
• Merchant surcharges
  Some businesses charge extra for credit card payments, especially with Amex.
• Too many applications may affect your credit profile
  Applying for multiple credit cards in a short time may impact your credit score.
• Risk of overspending
  A high credit limit can make it tempting to spend more than you can afford.
• Missed repayments can affect your credit score
  Late payments are usually reported to credit agencies.

How BNPL and credit cards affect your credit score

Credit cards:
Credit card activity is generally reported to major credit reporting agencies in Australia. Paying on time can help build your credit history, while missed repayments may negatively impact your credit report.

BNPL:
BNPL providers don’t all report in the same way. Some providers may report missed payments or defaults, while others may report account activity more regularly.

If you miss repayments or open multiple BNPL accounts, lenders may view it as a sign you’re struggling to manage your finances. Unlike credit cards, making BNPL repayments on time may not always contribute to building a strong credit history, depending on the provider.

BNPL vs credit cards: how to decide

There’s no one correct answer. The best choice depends on your budget, spending habits, and how confident you are managing repayments.

Here’s a guide to help you decide:

BNPL might suit you if:

• You’re making a one-off purchase and can repay it within 6–8 weeks
• You want to avoid interest charges and stick to a set repayment plan
• You have limited credit history
• The retailer offers BNPL at checkout
• You’re confident you can meet repayments on time
• The repayments fit comfortably into your budget

A credit card might suit you if:

• You want flexibility to repay over time
• You want a backup option for unexpected expenses
• You’re looking to build or improve your credit history
• You like earning rewards or travel perks
• You usually pay off the full balance each month
• You want additional purchase protection for online shopping
• You’re buying from international retailers

Looking for another option? Credit24 personal loans could help

If BNPL or a credit card doesn’t suit your needs, a personal loan could be another option for managing larger expenses or planned costs.

Credit24 personal loans may offer a structured way to borrow with set repayments:

• Apply for between $500 and $10,000
  You can apply for an amount that suits your situation, such as covering bills, repairs, or other one-off costs.
• Apply online in minutes
  The process is quick and simple, with outcomes provided once your application is assessed.
• Use the funds your way
  There are no restrictions on how you spend the money.
• Repay in regular instalments
  Fixed terms mean you’ll know exactly how much to repay and when, which may help with budgeting.
• Transparent fee structure
  Fees and charges are disclosed upfront so you can understand the total cost before proceeding.
• May support your credit history
  Making repayments on time may help demonstrate responsible credit behaviour.
• Flexible uses
  Some people use personal loans to consolidate multiple repayments, such as BNPL balances.
• Subject to responsible lending checks
  Every application is assessed to help determine whether the loan is suitable for your situation.

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Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839.

The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.