Buy Now, Pay Later vs Credit Card in Canada: Which Costs Less?

A loan offered at checkout that splits a purchase into instalments. The two common types are pay-in-4 (four payments every two weeks, usually interest-free) and monthly plans over several months or years, which can charge interest.

Paying your credit card in full costs nothing extra. Over 12 months, a 0% plan also costs nothing, while carrying the balance on a 20.99% card costs about $140.76 in interest.

Affirm offers interest-free pay-in-4 and monthly plans with rates from 0% to 31.99% APR, subject to provincial limits; not everyone qualifies for 0%, and a minimum purchase or down payment may be required. Afterpay splits a purchase into four interest-free payments every two weeks; its only fees are for late payments.

When you can pay the full statement balance by the due date. Canadian credit cards must give at least 21 days without interest on new purchases when you pay in full, and you earn your card’s rewards, often 1% to 2% back or more in bonus categories.

When you need a few months to pay and can get 0% or a low rate. Spreading $1,200 over 12 months at 0% costs nothing, while carrying it on a typical card costs well over $100. Check the rate you’re offered before you accept: at 25% to 30% a plan costs more than most cards.

Mainly overspending and stacking several plans at once. In FCAC’s small pilot study of users, 20% said they spent more because of buy now, pay later, and 44% of repeat users had two or more plans running at the same time.

It can. Some providers run only a soft check to approve you, which doesn’t affect your score, but how plans are reported varies by provider and plan type. Paying on time protects your credit; check your Equifax and TransUnion reports if you use these plans often.