Is a credit card is safer than Buy-Now-Pay-Later?

When you’re shopping online, you may have seen an option to pay for your purchase in instalments through a third party like Klarna or Clearpay. These are buy-now-pay-later offers that let you spread the cost of your purchase. They are a way of borrowing credit, but they are surprisingly different to credit cards or personal loans.

When you use buy-now-pay-later, you’re making a credit agreement with the retailers involved. You’ll normally be given:

If you don’t pay your instalments as agreed, you may be charged a fee or have your debt passed to a debt collection agency.

Unlike when choosing a credit card, you won’t be able to compare or choose the buy-now-pay-later provider you want. The only option is the one your retailer has partnered with.

There are a few factors that can make credit cards a safer option.

Your credit rating is taken into account

When you apply for buy-now-pay-later credit, most providers carry out a ‘soft check’ of your credit history. This doesn’t take all of your information into account. When you apply for a credit card, your provider carries out a ‘hard check’ for a fuller picture of your finances and assesses how likely you will be able to afford repayments.

It can be easier to see your debt

If you use a credit card to make purchases from several different shops, you’ll be able to see your debt in one place. If you take out several different buy-now-pay-later agreements from different shops, it may be harder to keep on top of exactly how much you owe.

You get extra consumer protection

When you use a credit card to buy goods or services that cost between £100 and £30,000, you’ll also have extra protection from Section 75 of the Consumer Credit Act 1974.

When you use a credit card to buy something like a laptop or holiday and something goes wrong, you may be able to claim your money back through your credit card provider.

Section 75 applies to purchases for goods or services that are worth between £100 and £30,000. It’s part of the Consumer Credit Act 1974 and means that your credit card provider is jointly liable (or responsible) when a company doesn’t deliver what they promised because they’ve misled you or they’ve gone bust.

You can read more about how it works in our guide to your rights under Section 75.

Section 75 doesn’t apply to debit cards, so you won’t be protected for purchases in the same way. However, if you’re making purchases that are under £100, you will have access to some protection through chargebacks. Find out more about chargebacks and when you can request one.

If you’re buying something more expensive, like flights or furniture, you’ll have more protection when you use a credit card versus if you pay using a debit card.

Sadly, scammers are out there hoping to take advantage of shoppers. There are a few things you can do to help keep your credit card safe.

Never share your PIN or write it down

No company should ever need your PIN, so don’t hand it over.

Be wary around emails that ask for details

If you get an email asking you to verify personal or card details, delete it and follow up separately with the company it appears to be sent from.

Watch out when using public WiFi

When it comes to entering sensitive information online, it’s safer to do it on WiFi you can trust or through your mobile carrier.

For more ways to avoid being scammed, have a look at our tips for staying safe online.