{"id":1262,"date":"2025-07-12T21:51:53","date_gmt":"2025-07-12T21:51:53","guid":{"rendered":"https:\/\/ft365.org\/index.php\/2025\/07\/12\/buy-now-pay-later-credit-reporting-is-coming-but-are-credit-cards-still-a-better-option-bankrate\/"},"modified":"2025-07-12T21:51:53","modified_gmt":"2025-07-12T21:51:53","slug":"buy-now-pay-later-credit-reporting-is-coming-but-are-credit-cards-still-a-better-option-bankrate","status":"publish","type":"post","link":"http:\/\/ft365.org\/index.php\/2025\/07\/12\/buy-now-pay-later-credit-reporting-is-coming-but-are-credit-cards-still-a-better-option-bankrate\/","title":{"rendered":"Buy Now, Pay Later Credit Reporting Is Coming, But Are Credit Cards Still A Better Option? | Bankrate"},"content":{"rendered":"<div>\n<p>This fall, FICO (the creator of the most popular credit scoring formula) will begin incorporating <u>buy now, pay later<\/u> (BNPL) loans into Americans\u2019 <u>credit scores<\/u> for the first time. Depending on your perspective, this is either a very positive development or a very unwelcome one.<\/p>\n<p>When we talk about buy now, pay later, we\u2019re referring to installment loans offered by the likes of <u>Affirm<\/u>, <u>Afterpay<\/u> and <u>Klarna<\/u>. Four interest-free payments over six weeks used to be the norm, although many of these plans are now lasting longer (often three to 24 months), and most loans longer than six weeks charge interest (rates vary wildly, from zero all the way up to 36 percent APR).<\/p>\n<p>BNPL users often skew younger and many have lower credit scores. Some don\u2019t have a credit score at all, which gets back to the potential advantages and disadvantages of more BNPL credit reporting.<\/p>\n<p>                         <iframe loading=\"lazy\" title=\"Buy now, pay later credit reporting is coming soon \u2013 but are credit cards still a better option?\" width=\"560\" height=\"315\" data-src=\"https:\/\/www.youtube.com\/embed\/SM8vBCNL9vo\" src=\"https:\/\/www.youtube.com\/embed\/SM8vBCNL9vo\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen>                         <\/iframe>                                              <\/p>\n<p><em>Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I\u2019d be happy to help.<\/em><\/p>\n<h2 id=\"why-some-consumers-choose-bnpl\" data-position=\"1\" data-beam-element-viewed data-id=\"br-h2-1-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Why some consumers choose BNPL\" data-outcome>Why some consumers choose BNPL<\/h2>\n<p>Part of BNPL\u2019s appeal is that these plans are easier to qualify for than credit cards. In fact, <u>Bankrate\u2019s 2025 Buy Now, Pay later survey<\/u> reveals that about a quarter of BNPL users (26 percent) cite \u201ceasy to obtain credit\u201d as a reason they chose to pay with a BNPL service. Only three factors rate more highly: 57 percent want to pay in installments and spread out their cash flow, while 40 percent enjoy low\/no interest rates and 31 percent like knowing exactly how much they owe and precisely how long the loan will last.<\/p>\n<p>But easy access to credit is a double-edged sword. It\u2019s true that BNPL lenders often aren\u2019t as selective as credit card issuers, in part because these are relatively short-term, smaller-dollar loans. Many people (especially young adults) choose BNPL for this reason: 33 percent of Gen Zers (ages 18-28) and 30 percent of millennials (ages 29-44) who use BNPL cite easy access as an advantage, versus just 19 percent of users between the ages of 45 and 79.<\/p>\n<p>You would think that easy access would lead to lots of customers paying late, but the delinquency rates reported by leading BNPL providers are surprisingly low. For example, Affirm says its delinquency rate is three to four times lower than traditional credit cards.<\/p>\n<p>The carrot of being able to continue to use these services has proven more successful than the stick \u2014 or punishment \u2014 of credit score damage (which hasn\u2019t historically affected BNPL users unless they were so late they got sent to collections) or late fees (some providers, including Affirm, don\u2019t even charge late fees).<\/p>\n<h2 id=\"it-takes-credit-to-build-credit\" data-position=\"2\" data-beam-element-viewed data-id=\"br-h2-2-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"It takes credit to build credit\" data-outcome>It takes credit to build credit<\/h2>\n<p>An unintended consequence of BNPL, however, is that it takes credit to build credit. It\u2019s similar to how employers want to see relevant work experience, but how do you get that experience to show, especially as a young adult? Someone might be drawn to BNPL because it\u2019s easy to get and not overly selective about credit quality, but so far, using BNPL responsibly hasn\u2019t helped you improve your credit score. And a strong credit score is important for your financial future, since it helps you qualify for <u>mortgages<\/u>, <u>auto loans<\/u>, <u>credit cards<\/u> and other financial products (even apartment leases).<\/p>\n<p>The adoption of BNPL credit reporting will help people who use these services responsibly (as in, those who pay on time and keep their debts relatively low). This describes most BNPL users. A test run <u>conducted by FICO and Affirm<\/u> revealed that few BNPL users\u2019 credit scores will decrease once these plans are included in credit scoring. On the flip side, BNPL users who pay late or rack up too much debt could see their credit scores fall. That\u2019s unfortunate, but also fair \u2013 the same thing happens if you pay a credit card late or max out your credit limit. A credit score is meant to predict your likelihood of repaying a loan, after all, and some behaviors are riskier than others.<\/p>\n<h2 id=\"bnpl-is-a-stepping-stone\" data-position=\"3\" data-beam-element-viewed data-id=\"br-h2-3-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"BNPL is a stepping stone\" data-outcome>BNPL is a stepping stone<\/h2>\n<p>I believe that buy now, pay later is more of a starter product, not necessarily something that users should plan to use throughout their financial lives. Responsible credit card usage provides benefits that BNPL can\u2019t match, including money-saving <u>rewards programs<\/u> and buyer protections (everything from fraud and dispute resolution to <u>purchase protection<\/u>, <u>extended warranties<\/u> and more).<\/p>\n<p>It\u2019s good that BNPL is closing the gap on credit reporting (although there will still be a lag there since not all BNPL lenders are providing information to the credit bureaus and many lenders have not yet subscribed to the newer FICO models that will incorporate BNPL). Even once BNPL credit reporting becomes mainstream, credit cards will continue to offer many users unbeatable advantages. These benefits usually center around paying in full each month to avoid interest, however, which can be a big \u201cif.\u201d<\/p>\n<h2 id=\"when-are-credit-cards-better\" data-position=\"4\" data-beam-element-viewed data-id=\"br-h2-4-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Credit cards are great, as long as you can avoid pricey interest charges\" data-outcome>Credit cards are great, as long as you can avoid pricey interest charges<\/h2>\n<p>Almost half (48 percent) of credit cardholders carry debt from month to month, <u>according to Bankrate\u2019s 2025 Credit Card Debt Survey<\/u>. It doesn\u2019t make sense to pay 20 percent in interest (approximately the <u>average credit card rate<\/u>) just to earn 1 or 2 or even 5 or 6 percent in cash back or travel rewards. Someone with credit card debt might find it more desirable to finance a couch or a TV or a refrigerator with BNPL rather than digging themselves deeper into a credit card debt hole that sometimes takes decades to emerge from.<\/p>\n<p>Therefore, sometimes BNPL is the best option. If you can get a good low- or no-interest deal on something that you really need (like a new refrigerator), I can see the advantages of paying something like $50 a month over two years. I\u2019m less enamored with BNPL for discretionary purchases and consumables such as groceries, gas and food delivery.<\/p>\n<h2 data-position=\"5\" data-beam-element-viewed data-id=\"br-h2-5-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"The bottom line\" data-outcome>The bottom line<\/h2>\n<p>It\u2019s true that not everyone can afford to pay their credit cards in full each month \u2014 and there can be understandable circumstances that cause that \u2014 but I still think BNPL is something that users should aspire to graduate from.<\/p>\n<p>Still, no shame. Most people with credit card debt have it for practical reasons (47 percent primarily blame emergency expenses and 28 percent point the finger at day-to-day expenses). But other than the occasional exception, such as a high-earner looking to use \u201cother people\u2019s money\u201d to finance a Peloton bike for 12 months with no interest via Affirm, I see BNPL as a stepping stone to improve your financial future. I\u2019m glad that building credit will soon be a benefit of BNPL, but I still see credit cards as vastly superior in terms of rewards and buyer protections.<\/p>\n<div data-cta-initial data-helpful-cta data-beam-element-viewed id=\"did-you-find-this-helpful\" data-type=\"cta\" data-location=\"article-bottom\" data-position=\"banner\" data-text=\"Did you find this page helpful?\">\n<div>\n<p>             Did you find this page helpful?             <\/p>\n<\/p><\/div>\n<p>Help us improve our content<\/p>\n<\/p><\/div>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>This fall, FICO (the creator of the most popular credit scoring formula) will begin incorporating buy now, pay later (BNPL) loans into Americans\u2019 credit scores for the first time. Depending on your perspective, this is either a very positive development or a very unwelcome one. When we talk about buy now, pay later, we\u2019re referring<\/p>\n","protected":false},"author":2,"featured_media":1263,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-1262","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-news"],"featured_image_urls":{"full":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards.jpg",1280,720,false],"thumbnail":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-150x150.jpg",150,150,true],"medium":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-300x169.jpg",300,169,true],"medium_large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-768x432.jpg",640,360,true],"large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-1024x576.jpg",640,360,true],"1536x1536":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards.jpg",1280,720,false],"2048x2048":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards.jpg",1280,720,false],"morenews-featured":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-1024x576.jpg",1024,576,true],"morenews-large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-825x575.jpg",825,575,true],"morenews-medium":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-590x410.jpg",590,410,true],"crawlomatic_preview_image":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/07\/1262-BNPL-vs-credit-cards-260x146.jpg",260,146,true]},"author_info":{"display_name":"henry","author_link":"http:\/\/ft365.org\/index.php\/author\/henry\/"},"category_info":"<a href=\"http:\/\/ft365.org\/index.php\/category\/latest-news\/\" rel=\"category tag\">Latest News<\/a>","tag_info":"Latest News","comment_count":"0","_links":{"self":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/1262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/comments?post=1262"}],"version-history":[{"count":0,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/1262\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media\/1263"}],"wp:attachment":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media?parent=1262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/categories?post=1262"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/tags?post=1262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}