Buy now pay later or a credit card?

Buy now pay later and a credit card both let you take something home now and pay for it later, but they are different products with different rules. Buy now pay later is an online payment option that lets you buy an item straight away and delay paying until a later date, usually interest free over a short period¹. A credit card is a revolving line of credit you can use almost anywhere, and it charges interest if you do not clear the balance.

The biggest change is regulation. Buy now pay later is now formally called Deferred Payment Credit, and the Financial Conduct Authority started regulating it on 15 July 2026¹. That brought affordability checks, access to the Financial Ombudsman Service and Section 75 protection for eligible purchases. Agreements taken out before that date remain unregulated, and the new protections do not apply to them¹.

So the choice is not simply "free versus interest". It comes down to where you can use each one, what happens if a payment is missed, how a refund is claimed, and how each shows up when you apply for a mortgage.

Buy now pay later is now regulated as Deferred Payment Credit

For years, buy now pay later sat outside mainstream credit regulation. An exemption in law meant these payment plans were not treated in the same way as traditional credit agreements⁶. That changed when Parliament approved plans to regulate unregulated buy now pay later credit in July 2025, and rules came into force in July 2026⁷.

The formal name is Deferred Payment Credit, often shortened to DPC⁸. The FCA consulted on its proposed approach to regulating it in September 2025⁹. From 15 July 2026, interest-free buy now pay later products became subject to a new regulatory regime overseen by the FCA¹⁰.

Not every arrangement is caught. Deferred Payment Credit agreements are regulated if the lender and the supplier of goods or services are different businesses¹. If you buy something from a business and use buy now pay later that is provided by that same business, it is not regulated¹. That distinction matters: it decides whether you get the new protections at all.

The rules also brought buy now pay later closer to credit cards in law. Buy now pay later now has similar protections to credit cards, which are covered under the Consumer Credit Act⁸. Lenders must be authorised and regulated by the FCA, and they must carry out affordability checks to make sure loans are affordable for consumers⁸.

Missed payments: fees can make either cost more than paying upfront

Buy now pay later is marketed as interest free, and it is: the Financial Ombudsman Service describes it as a way of spreading payments, interest free, for something you buy over a short period⁵. But interest free is not the same as cost free. If you do not make payments or pay off the full amount during the set time, you will be charged interest and extra fees⁸.

The same pattern applies to credit cards. Extra charges are added if you miss payments¹². Charges of more than £12 for missing a credit card repayment may be seen as unfair⁴. On buy now pay later, you may be charged a penalty fee if your payments are late or missed, and your provider may pass information about the missed payment to credit reference agencies, which will affect your credit score².

If you miss one or two payments, the usual first step is a reminder. If you catch up, no further action should be taken and the missed payments may not be recorded on your credit file, though interest and charges including late payment charges will be added¹³. Let arrears build and the consequences harden: you can also be charged high fees and interest if you fall behind¹⁴.

Where you can use each one: online shops, catalogues and the high street

This is where the two products diverge most in everyday use. Credit cards can be used to buy goods anywhere, including over the phone, online or by post¹⁶. You can get one from banks, finance companies and larger supermarket and store chains¹⁶. In the UK, card payments usually run through Visa or Mastercard¹⁷.

Buy now pay later is narrower. It is offered at checkout by a lender, and your credit agreement is with the buy now pay later provider, not the retailer⁸. Providers in the UK include Klarna, Clearpay, PayPal and Amazon⁸. Repayment can mean regular instalments over weeks or months, or a single payment by a fixed date⁸. National Debtline describes the typical shape as paying in one go, or in several instalments usually spread over three months or more¹⁸.

Store cards sit in a third category. They work in the same way as credit cards but often charge higher rates of interest and can only be used to pay for goods in that chain of shops¹⁹. Unless you plan on paying off the full balance straight away, they can often work out to be twice as expensive as credit cards¹⁹.

One practical trap with credit cards is using them through a third-party payment system. Doing so can break the chain between you, the creditor and the retailer, losing Section 75 protection on items costing more than £100. That includes PayPal, Google Wallet, buy now pay later schemes such as Klarna and Clearpay, and third-party sellers on Amazon¹⁵.

Refunds and faulty goods: your claim routes with each

For eligible purchases, both routes now lead to Section 75 of the Consumer Credit Act. On a credit card, your provider is jointly liable with the retailer if something goes wrong, meaning you can claim a refund if you get faulty goods or your item never arrives, and this applies even if you only put part of the cost on the card¹⁵.

Buy now pay later now works the same way for agreements taken out on or after 15 July 2026. When buying a single item costing between £100 and £30,000 on or after that date using a buy now pay later provider, you are protected under Section 75, and your provider is jointly liable in cases of faulty goods, non-delivery or if the retailer goes out of business². The FCA confirms this is the same protection you would have if you used a credit card¹.

Below the £100 threshold, Section 75 does not apply to either. That is where chargeback comes in. If you paid with a debit card or charge card, or with a credit card or buy now pay later and you cannot use Section 75, you can ask for your money back using chargeback³. It lets consumers challenge and try to recover payments made using a debit or credit card, although it only applies in certain circumstances²⁰.

Chargeback is not a guaranteed right. If you paid with a debit or credit card, you can still ask for chargeback, but your bank or credit provider might not agree²¹. There is also a time limit: it applies if you paid by debit card, or on a credit card for an item costing less than £100, and it is less than 120 days since the purchase²².

Do purchases made before 15 July 2026 get the new protections?

No. Any Deferred Payment Credit agreement taken out before 15 July 2026 remains unregulated, and the new protections do not apply¹. If you already have a buy now pay later agreement, it continues under the existing rules²³. That means no Section 75 claim and no access to the Financial Ombudsman Service for those agreements.

The Financial Ombudsman Service can look at a complaint only if you took out the agreement on or after 15 July 2026⁵. The same date rule applies across the board: buy now pay later agreements taken out on or after 15 July 2026 are within its remit²⁴.

For new agreements, the picture is different. Buy now pay later shoppers have fairer and faster access to refunds under the rules²⁵. The new rules only apply to buy now pay later agreements taken out from 15 July 2026²³.

If you have an older agreement and something goes wrong, your options are the ones that existed before regulation: complain to the retailer, use chargeback on the card you paid with if you used one, and pursue the retailer directly for faulty goods or non-delivery. The Consumer Rights Act and the Supply of Goods and Services Act still apply to the goods themselves, and if you used a credit card for the purchase you might be able to pursue your claim under Section 75 of the Consumer Credit Act 1974²⁶.

Can buy now pay later affect a mortgage application?

It can, and this is one of the least obvious differences between the two products. Lenders are increasingly asking about buy now pay later use as part of their affordability assessment processes for mortgage lending²⁷. A pattern of regular use may be fed into the affordability calculation or lead to delays through further questions²⁸.

Missed payments are more serious. If you miss payments on a buy now pay later agreement, these will show on your credit score and can make it harder to get credit in the future⁸. The same is true of credit cards: extra charges are added if you miss payments, and persistent debt rules now apply to credit cards, store cards and catalogues¹².

There is a wider point about how buy now pay later is perceived. Most users think of it as a way of spreading payments, not as a form of borrowing²⁷. That gap matters when a lender looks at the same transactions and sees credit. People who use buy now pay later are more likely to have experienced a significant life event in the past year, or to have recently defaulted on a household bill or another form of credit²⁷.

On credit checks, practice varies. Some providers will carry out a soft credit check, and some will carry out a hard credit check⁸. Klarna, for example, performs a soft credit check when you apply for its buy now pay later financing³⁰. For anything you buy using buy now pay later, a lender will carry out a credit check to make sure you can afford the repayments⁸.

Buy now pay later or a credit card: which suits the purchase

Neither product is better in the abstract. What differs is the fit between the product and the purchase, and the protections that follow.

Buy now pay later tends to suit a single, known purchase at a retailer that offers it, where you can clear the balance within the interest-free period. It is interest free while you keep to the terms, the credit agreement is with the provider rather than the shop, and for agreements from 15 July 2026 you get Section 75 protection on a single item costing between £100 and £30,000². The risks are late fees, credit file reporting on missed payments, and the effect a pattern of use can have on a mortgage application².

A credit card tends to suit spending across many places, including over the phone, online or by post, and purchases where you want the option to spread the cost over a longer period¹⁶. Section 75 applies to a single item costing more than £100 and no more than £30,000³. The risks are interest if you do not clear the balance, late charges, and losing Section 75 protection if you route the payment through a third-party system¹⁵.

Store cards are a third option, and usually the most expensive unless you clear the balance immediately¹⁹.