Learning how each operates Credit cards allow students to spend up to a set amount that can be repaid in full on the due date or in instalments with interest. Buy Now, Pay Later (BNPL) services split payments into instalments, often interest-free if repaid within the set period. While both offer instant access to money, terms for repayment and fees vary significantly.
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Credit cards and building financial history Paying bills on time and maintaining utilisation low with a credit card responsibly enables students to initiate developing a credit score early. This can come in handy when borrowing loans in the future or when renting an apartment. BNPL transactions, by and large, never add to credit history unless there is a default, and then it could adversely affect your score.
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Costs and interest implications Credit cards incur annual charges and steep interest rates (30–40% per annum) on unpaid balances. BNPL is marketed as interest-free but may include a processing fee, late fee, or interest in case of a delay in payment. Students unable to repay with disciplined habits can fall into debt faster with credit cards due to compounding interest.
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Flexibility and usage limits Credit cards can be found everywhere, both digitally and physically, and often come with reward points, cashback, and purchase protection. BNPL tends to be offered by specific merchants and platforms. However, BNPL products may not be as hard to get approved for in the absence of a high-income job or credit history, hence their appeal to first-time borrowers.
Student borrower risks Both credit cards and BNPL carry the potential for over-borrowing on the part of students who don't have a steady income. The convenience can cover up the fact of repayment obligation. Not paying either can trigger late fees, damage credit worthiness, and create long-term financial stress.
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Which is best for students? If the desire is to build credit and have broad use, then a low-limit credit card with strict payment habits might be best. For occasional purchase and interest-free instalments on accepted sites, BNPL could be handy. The decision would depend on spending habits, payment habits, and long-term financial goals.
