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split in 4.

Buy Now, Pay Later vs. Credit Cards: Which Should You Choose?

By Divya Premkumar

If you’re reading this article, you may already be familiar with the concept of Buy Now, Pay Later (BNPL). Especially when it comes to online shopping, the option to split your payment in 4 at checkout has become nearly ubiquitous.


But you may still be wondering: how does this compare to paying with a traditional credit or debit card? Is there….a catch to using this service? And how does this payment method fit in with my budgeting and financial goals?


We’ll answer all these questions so you can make an informed decision about whether Buy Now, Pay Later is right for you.


How did Buy Now, Pay Later become a thing, anyway?


A major reason for the growing popularity of Buy Now, Pay Later among millennials is that this generation is facing a uniquely challenging post-recession economy. Many have been burned by rising levels of debt, whether in the form of student loans or credit cards (sound familiar?). This means that many millennials have begun to seek more transparent alternatives to manage their day-to-day spending while working towards longer-term financial goals.


Buy Now, Pay Later has been the answer to this generation’s aversion to debt. By breaking down payments into more manageable portions, customers can stretch their funds to cover a larger expense or simply get smarter about budgeting for day-to-day purchases.


In other words, BNPL platforms break down financial barriers and make the payment process as seamless as possible.


How does Buy Now, Pay Later work?


The concept of Buy Now, Pay Later is as simple as it sounds. The payment model allows you to break down your payments into installments so you’re not paying for the entire purchase upfront. Instead of putting down $200 at once, you can pay in four installments of $50 over six weeks.*


The concept of buying things and paying for them later is not entirely new, but it’s never been this consumer-friendly. With Zip, there are no hidden fees like there are with credit cards. Unlike traditional payment methods, the approval process is instant and does not require a hard credit check. And with our app, you have a transparent, real-time view of every purchase you make. This is a major win for customers and retailers.


So, how is this different from a credit card?


If you think Buy Now, Pay Later sounds like a pretty sweet deal—we’re with you! But at the end of the day, everyone’s financial needs and priorities are different. Here are a few key points of comparison to consider when weighing the benefits and drawbacks of BNPL versus credit, so you can make the best decision for you.


  • Instant access

The application process for BNPL platforms is entirely hassle-free. While credit cards come with a tedious application process that involves a long waiting period, your access to Buy Now, Pay Later with Zip is almost instant and doesn’t require a hard credit check.


Customers can create an account on the app and pay for their products immediately once approved for the service. The instant gratification that this payment method provides is a major plus for millennials and gen z-ers.


  • To debt or not to debt

One could argue that credit cards essentially allow you to buy things now and pay for them later (i.e., at the end of the month). However, there’s a big catch: credit payments often come with a significant added cost, aka interest. This is actually how banks and credit card companies make money, which means that it’s in their best interest (no pun intended!) for users to rack up debt. This predatory lending practice is a major reason why BNPL platforms exist in the first place.


We can’t speak for all Buy Now, Pay Later services, but when it comes to Zip, there are absolutely no hidden fees. Payments are made at regular two-week intervals, with friendly reminders ahead of installment due dates to ensure that you never miss a payment. This holds you more accountable for your purchases and makes it a lot harder to put off those payments and rack up a mountain of debt.


To ensure that Buy Now, Pay Later fits with your existing spending habits and savings goals, it’s important to budget for your expenses upfront. For instance, if you opt to split a purchase in 4, make sure to account for the remaining three payments in your budget for the upcoming month. This gives you a long-term view of your expenses and lets you manage your spending accordingly.


  • Responsible spending limits

Credit cards come with a predetermined limit that can put a cap on your spending. However, these credit limits often run into the thousands, making it easier to lose track of your expenses and overspend.


With Zip, your available balance is capped at a few hundred dollars. Rather than deferring payments indefinitely and racking up interest along the way, your installments are due on a set schedule and automatically deducted from the card connected to your account to encourage timely payment. Unlike credit, we never try to fleece you with sneaky repayment schedules or hidden costs: you can always expect to make four standard payments over six weeks.


Our customers can only use Zip to split payments of $35 or more with the app. Your available balance is also determined by any outstanding installments, which means that the faster you pay off your purchases, the higher balance you’ll have available in the app for new purchases. In other words: the more you stay on top of your finances, the more funds you’ll have at your disposal.




When used responsibly, Buy Now, Pay Later is a great tool for day-to-day budgeting that encourages healthy long-term financial habits. For a taste of how the payments landscape is shifting, we can take a cue from Australia, where BNPL is already ubiquitous. According to a recent Deloitte report, “30 percent of Australian consumers have a BNPL account, and nearly half of BNPL users have stopped using credit cards for their transactions altogether.”


For a generation that’s been burned by debt, BNPL is the real winner for millennials and consumers at large. Unlike credit, it offers:


  • Instant approval and no hard credit checks
  • No hidden fees
  • A transparent, real-time view of every purchase you make in the app that encourages smart spending and budgeting


Download the Zip app to check out the better way to pay and start paying in 4 anywhere you shop.

*Terms and conditions apply. Prices are included for representative example only, and are subject to price and availability changes without notice. Taxes and platform fee, if applicable, are not included in this calculation. A $500 purchase might cost $126/payment over 4 payments with a 13.88% APR* for a total payment of $504. *The annual percentage rate is based on creditworthiness and is subject to credit approval. A $4 origination fee is charged at commencement – you pay $1.00 of this fee as a prepaid finance charge when you make your initial payment today. The remaining $3.00 is included in your future payments. This results in, for example, 4 equal periodic payments of $126 per $500 borrowed for a rate of 13.88% APR. Minimum purchase of $35 required. Estimation of installment payment and annual percentage rate excludes potential tax and shipping costs.

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Zip’s editorial content is not written by a financial advisor. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

About the author
Divya Premkumar

Divya Premkumar has written for various online publications on topics such as personal finance, investing and travel. In her spare time, she is either exploring a new city or reading a good book.