Should you use buy now, pay later to avoid credit card debt?

If you've been eyeing a large purchase, whether it's a new couch or the latest MacBook, you may be wondering if using a buy now, pay later (BNPL) service is a reasonable option.

A buy now, pay later loan could work if you're worried about taking on long-term debt and find a plan that doesn't charge interest. However, the right credit card can offer you up to 21 months to pay off your purchase, interest-free, and you may earn rewards.

CNBC Select goes over when a buy now, pay later plan could make sense and scenarios when a credit card could be a better option.

A buy now, pay later plan is a type of installment loan that lets you make a purchase and spread payments out over the course of weeks or months, and they've become a popular way to make purchases while delaying the financial impact. "Pay-in-four" plans, or four interest-free biweekly payments, are common, but the exact terms will vary depending on the plan.

"BNPL can be a smart alternative to using a credit card for big purchases, especially if your credit card has a higher interest rate and you are not able to pay off the balance by the end of the month," Ryan A. Hughes, founder and portfolio manager at Bull Oak, told CNBC Select.

While it requires discipline to make each payment on time, buy now, pay later plans can be an attractive option for shoppers who try to avoid debt, said Hughes, as they don't typically charge interest and split up payments.

What problems are most common?

One of the most common ways buy now, pay later loans can cause issues is simply by piling up and becoming overwhelming. These plans are widely available and very easy to use, so you may end up borrowing more than you can realistically pay back.

Referring to a LendingTree study, Hughes noted that nearly half (47%) of buy now, pay later users have made a late payment on their loan in the past year.

"There is not enough friction to use this product; it is simply too easy to use and fall behind on the payments," said Hughes.

While buy now, pay later does have its place as a financial tool, it shouldn't be something you continue to rely on when making everyday purchases.

"BNPL is engineered to exploit behavioral shortcuts and reframe poor financial habits as a seamless user experience," he said. "Yes, it is convenient, but there is a real cost if you are not disciplined with your finances."

Available BNPL options

While buy now, pay later plans can work for some situations, they shouldn't be used on all products across the board.

If you're considering using buy now, pay later, Hugh cited home goods, electronics and furniture as some of the top categories, while everyday purchases like groceries, takeout and impulse buys should be avoided.

If you're considering testing out a buy now, pay later service, Affirm is one of the most widely available; it even has a partnership with Amazon. If you make purchases totaling $50 or more in eligible products, you can select Affirm as your payment method, choose your payment plan and begin paying off your purchase.

Affirm doesn't charge fees and offers both a pay-in-four, interest-free option and monthly payment plans ranging from three to 12 months (or longer).

If you're worried about a buy now, pay later loan affecting your credit score, Klarna only reports pay-over-time loans to major credit bureaus, but not pay-in-full, pay-in-four or pay-in-30 plans (nor Klarna Card activity). Similar to Affirm, Klarna does not charge fees for late or missed payments.

While a BNPL loan might be easy and simple to sign up for, using a credit card does have some advantages.

Credit card protections

One of the biggest reasons you'd want to use a credit card, especially for larger purchases, is due to the protections offered.

For instance, the Chase Sapphire Preferred® Card (see rates and fees) offers purchase protection for 120 days against damage or theft, on up to $500 per item, as well as extended warranty protection that adds an additional year onto the manufacturer's U.S. warranty (on eligible warranties of three years or less, up to four years from the date of purchase).

If you're booking travel, like flights or hotels, the card also offers various travel protections, including trip cancellation and interruption insurance for up to $10,000 per traveler.

Rewards on purchases

Covering a purchase with a credit card rather than a buy now, pay later loan means you could earn rewards. A variety of cards earn at least 1.5% cash back on purchases, and others — depending on the category — can earn as much as 10% back or 10X points. For example, with the Capital One Quicksilver Cash Rewards Credit Card, you can earn 1.5% cash back on every purchase and take advantage of a zero-interest intro offer on purchases for 15 months (18.49% to 28.49% variable APR thereafter).

Credit building

Not all buy now, pay later loans are reported to credit bureaus (though there's a chance the status quo could change in the future, with Affirm now reporting all payment plans and payment activity to Experian and TransUnion). If you're looking to build up your credit score, using a credit card and making responsible, on-time payments is still one of the most consistent ways to do so.

While similar in nature, a 0% APR credit card is different from a buy now, pay later plan. Instead of splitting up a purchase into individual payments, a 0% APR credit card lets you make payments over time, sans interest, up to a specified amount of time. (Currently, the highest offers extend to 21 months.)

One potentially limiting factor is that these cards often require a relatively strong credit score for approval, though there are options for fair or limited credit.

If you're looking for a card that offers 0% intro APR on both purchases and qualifying balance transfers, the Wells Fargo Active Cash^® Card offers a 0% intro APR for 21 months (followed by an 18.49%, 24.49% or 28.49% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5). Plus, you can earn 2% cash rewards on every purchase.

Should you prefer sacrificing a few months of no interest in favor of bonus category rewards, the Chase Freedom Unlimited® (see rates and fees) features a 0% intro APR for 15 months (18.24% to 27.74% variable APR afterward) and earns 3% cash back on dining at restaurants and drugstores, 5% back on travel purchased through Chase Travel and 1.5% back on all other purchases.

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Ryan A. Hughes, founder and portfolio manager at Bull Oak, a fee-only fiduciary firm.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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