Should You Prioritize Your ‘Buy Now, Pay Later’ Payments or Your Credit Card Balances?

A woman sitting at her kitchen table reviewing paper bills with a laptop open in front of her.

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Here’s how to make the right call.

Key points

  • You may owe money on the heels of the holiday season.
  • There’s one type of debt it could pay to focus on.
  • There will be less impact on your credit score if you get your BNPL plans paid off before tackling your credit card balances in full.

If you went a bit overboard on spending during the holiday season, you’re not alone. But you may now be sitting on a pile of different debts that are stressing you out. And you may be struggling as you figure out how to pay them off.

Generally speaking, it’s best to focus on your highest-interest debt first. But if you owe money on a “buy now, pay later” plan, or BNPL plan, then you may want to give that debt priority in the coming weeks. Here’s why.

You don’t want to mess up your credit score

Many consumers have started using BNPL plans to pay for purchases. And if you signed up for some during the holidays to swing your gifts and other expenses, you may now be on the hook for a series of short-term installment payments you need to cover.

In this specific situation, it could pay to put your BNPL plan payments ahead of your credit card payments. The reason? If you make your minimum payments on your credit card, you won’t be dinged as late or delinquent from a credit reporting standpoint. Or, to put it another way, if you keep up with your minimum credit card payments, your credit score won’t take a hit.

On the other hand, if you fall behind on your BNPL plan payments, your credit score could sustain serious damage. And once that happens, it could become difficult to get approved for a personal loan in a pinch, or to borrow affordably for any purpose. Plus, you’ll risk being assessed costly penalties and fees — penalties and fees that are avoidable provided you stick to the terms of your agreements.

Remember, BNPL plans, by nature, only give you a limited amount of time to pay off your purchases. Usually, these plans are set up so you’re making payments for about 12 weeks or less. So even if you’re forced to carry some credit card balances forward for another three months, all the while racking up interest, those interest charges may not end up being so high since you’re only talking about 12 weeks. And then, once you’re done paying off your BNPL plans, you can focus on eliminating your credit card debt.

Be careful with BNPL plans

BNPL plans often seem like an appealing financing option — until consumers realize how difficult it can be to keep up with them. The next time you’re tempted to sign up for a BNPL plan, make sure you can really afford to pay off the item in question within such a short period of time. In general, it’s best to reserve BNPL plans for emergency purchases you can’t pay for outright.

Also, if you think you won’t manage to keep up with a BNPL plan, you may be better off using a credit card — even if that means paying more in interest. While incurring the cost of interest certainly isn’t ideal, credit cards tend to give consumers more flexibility with payments. And that could spare you a world of credit score damage if money is tight.

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