'Buy now, pay later' plans vs. credit cards: Which is better for you?

GRAND RAPIDS, Mich. — Having to shop on a tighter budget has many of us turning to those “buy now, pay later” options. That’s when you can pay in four separate payments over time rather than paying everything upfront.

This option may sound more appealing than a credit card to avoid starter fees or interest, but a new Associated Press report from NerdWallet suggests there are still five key reasons to consider a credit card instead.

1. Credit card payments are typically reported to the three major credit bureaus: Equifax, Experian and TransUnion, which can help you establish a credit history.
2. A credit card helps you keep track of multiple purchases in one place, but juggling multiple “buy now, pay later” options could mean owing several companies with various due dates. Losing track could mean late fees. Plus, most “buy now, pay later” plans require automatic payments, which could mean overdraft fees, too.
3. There are laws in place which require credit card companies to clearly disclose the terms of the credit card and any associated fees. These protections are not in place when using “buy now, pay later” plans.
4. Credit card holders have legal rights when it comes to disputes or returns. These rights keep you from having to continue payments on a disputed purchase or having to pay multiple late fees on the same payment.
5. If you do find yourself drowning in multiple payments you can no longer keep up with, many credit counseling agencies have relationships with credit card companies and will often help to combine multiple accounts into a debt management plan. Many of these partnerships have yet to be formed with “buy now, pay later” companies.

While there are many benefits to credit card payments, “buy now, pay later” programs may still be a good option for you. There is generally no interest for several months, and the repayment structure is usually very easy. If you can make payments on time, and use just one or two "buy now, pay later" accounts at a time, it may help you save money.

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