Both products have their advantages and disadvantages. However, in terms of long-term value, credit cards provide more, thanks to their rewards, benefits, and credit building capabilities. And keep in mind, you can avoid interest charges completely with a credit card, regardless of its APR, so long as you pay off the statement balance in full every month.
That said, you can't (or shouldn't) apply for a credit card that features a 0% APR every time you need to finance a large purchase. That makes them -- in terms of avoiding interest charges -- better for planned purchases, and less so for spur-of-the-moment spending. BNPL can be a good tool to use to avoid interest charges for purchases you didn't expect to make, so long as it's used responsibly.
Just remember that as with a credit card, missing a payment will lower your credit scores. However, making a positive payment, depending on the lender, will never increase your scores. BNPL also can make spending easier, which could, in turn, lead to you spending more than you normally would on a purchase you don't need.
In addition, creating a habit of using Buy Now, Pay Later whenever you shop could lead to more debt. While it may not feel like it, it's still a loan. If a consumer is relying on these loans to make purchases through multiple lenders, it could get complicated to keep track of all the payments, and thus end up being detrimental to their overall financial wellness.
It all comes back to responsibility and how well consumers are budgeting themselves and how clear they are on all of the terms of whatever credit product they're applying for.
"To be responsible means consulting with experts when you can, so that might mean going into a branch and talking to someone about your options, or it might mean using online budgeting tools to really figure out where your money is going," Jennifer White, senior director for Banking and Payments Intelligence at J.D. Power, told ZDNet.
"There is a time and a place for BNPL. There is a time and a place for personal loans, home equity loans, and all of that. We need to make sure that today's consumer really knows that there is assistance available to them to figure out those best options. They shouldn't be afraid to use them, but it's not a bad thing to ask questions," she said.
And that responsibility doesn't merely rest with the consumer. Lenders have a responsibility to their clients to make sure that the products consumers are applying for won't damage their financial health.
"[BNPL] can be a better tool if used responsibly -- both by the consumer, and by the lender," Sethi said. "If [lenders aren't] disclosing what [their] customers are borrowing and for how much and for how long, then other lenders don't have visibility into that, and so it's hard to underwrite if you don't have the right denominator in terms of your debt."
For example, Affirm -- Amazon's only BNPL provider -- won't report payments for a BNPL plan with 0% interest or four installments to credit bureaus. Reporting not only helps to build credit, but would also show the loan on credit reports, giving other lenders a better idea of the kinds of outstanding credit a consumer may have.
"The responsible thing to do is report to the bureaus so that everyone who is underwriting knows what the debt is, and if the consumer is able to afford that debt," Sethi said.
It could be easy, as a lender, to simply approve every Buy Now, Pay Later applicant. And so they have a responsibility to make sure that the customers who are applying for these loans can actually afford it, while at the same time it's up to consumers to do what's in their best interest as well.
"The bottom line on this is if you consider personal loans, credit cards, and BNPL, they all have a particular advantage or application that makes sense for them," Cabell said. "But they're slightly different products, and they're not completely interchangeable. But they can all get you in trouble if you are using them the wrong way and basically operating outside your budget."