There is a lot of choice out there when it comes to paying with credit.
You can pay with a buy now pay later (BNPL) provider, opt for a debit card which is linked directly to your own money or use a credit card. All have their pros and cons, let’s break them down.
PROS OF CREDIT CARDS
Credit cards are generally accepted everywhere, are easy to use and give you access to more money.
Credit cards tend to offer more flexibility around repayments
If you keep up to date with your payments, credit cards can also help your credit score
Many cards offer rewards, including frequent flyer points and insurance that can also help save you money, if used sensibly
CONS OF CREDIT CARDS
Like all credit, if you fall behind on payments there is a cost to be paid.
Be aware that not all reward programs are good ones, so make sure you like what’s on offer before you sign up
Fraud is a big one. Choose a card that comes with online protection insurance
Overspending can also be a little too easy
PROS OF BNPL
You can spread the cost of your purchase over a longer period of time.
BNPL accounts are really quick and easy to set up
There is usually no interest or fees to consider
Payments are automatically deducted saving you precious time
CONS OF BNPL
There can be some pretty hefty charges if you miss a payment. BNPL doesn't offer any flexibility for repayments either.
It’s also limiting because you can only use BNPL at participating businesses
Because it is so easy to get credit, it can also be really easy to get in over your head
Another big thing to keep in mind is that lenders will take your BNPL credit limit into consideration when assessing you for a loan
PROS OF DEBIT CARDS
The major plus of a debit card is that because you are using your own money you won’t go into debt.
Linking a debit card to your bank account is easy
There are usually no annual fees either
Debit cards tend to be more secure because they require you to use a pin
CONS OF DEBIT CARDS
You can only spend the money that you actually have – this could be a pro too!
If you overspend you could be hit with overdraft fees
Large purchases can be tricky, EG buying a car
They’re not ideal for when you go travelling overseas
The bottom line
Used correctly, all these types of debit can be good. It’s just a matter of using the one that suits your needs the best.
Get informed
Financial Disclaimer:
This article should not be taken as financial advice. Check with a financial professional before making any decisions.
^Compare Club compares over a range of credit cards from Big Banks, Specialist finance providers and directly from payment issuers. Compare Club doesn't compare all cards on the market and not all cards are available to all people. Our panel of credit cards will change over time. Customers should consider their personal circumstances before applying for credit.
