Buy Now Pay Later in Canada: What Credit Card Options do You Have?

Jack Prenter, Founder of Dollarwise

High interest rates on credit card balances can be a significant burden, often hovering around 19% or more. However, an emerging trend in the Canadian credit market offers a solution: installment plans, commonly known as ‘buy now, pay later’ options.

These plans, provided by several credit card issuers in Canada, offer a more manageable approach to handling large purchases. Instead of accruing high interest on your credit card balance, you can opt for these plans to spread the cost over several months, typically at a much lower interest rate or sometimes even interest-free.

This article will delve into the intricacies of buy now, pay later plans in Canada, highlighting what you need to consider before opting in.

What does ‘buy now pay later’ mean?

‘Buy now, pay later’ plans in Canada offer a streamlined approach to managing large expenses. Essentially, these plans act like short-term loans, allowing you to extend the cost of a purchase over a specified period, usually for a nominal fee or reduced interest rate.

How does a ‘buy now pay later’ credit card plan work?

Setting up a ‘Buy Now, Pay Later’ plan with your credit card is a straightforward process. Firstly, access your credit card account through the issuer’s online platform.

The exact navigation may differ slightly among different issuers, but generally, you’ll find the option in the section where your credit card statements and recent transactions are displayed.

Depending on your credit card issuer’s policies, you may have the flexibility to apply these installment plans to individual large purchases or, in some cases, to the entire outstanding balance on your card.

Once you select the transaction you wish to convert into an installment plan, you’ll be presented with a range of term options. Each option will clearly outline the associated costs, helping you make an informed decision that aligns with your financial health and plans for the future. 

Do ‘buy now pay later’ plans cost anything?

The cost associated with ‘Buy Now, Pay Later’ plans can vary depending on the credit card issuer. The most significant fee is typically a percentage of the purchase amount. This fee could be applied to the total amount financed or to each monthly payment. The percentage rate varies among issuers, so it’s crucial to compare options.

Additionally, some plans may include initial setup fees. These are one-time charges imposed by the lender for arranging the installment plan.

While these fees can add to the cost of the plan, most issuers in Canada are transparent about these charges, ensuring that customers are not left guessing about the total cost of their installment plan.

As always, it’s advisable to read the terms and conditions carefully to understand the full financial implications of any ‘Buy Now, Pay Later’ plan you’re considering.

5 Credit card issuers that offer ‘buy now pay later’ plans

If you’re interested in getting yourself a ‘Buy Now Pay Later’ plan, you’ll be able to choose from a couple of card issuers. 

Each of the following 5 credit card issuers has different fees and interest rates associated with BNPL (Buy Now Pay Later) plans. They may also charge you more or less based on your credit score and other financial health factors. 

Card IssuerAssociated Fees*Annual Interest RateMinimum Amount
American ExpressVariable10%$100+
Brim Financial* 7% on Overall Purchase
* 0.475% Monthly Fee
CIBC* 2% Installment Fee
* Variable Monthly Interest Rate

*Based on $500 put on the plan

AMEX plan it

American Express offers the ‘AMEX Plan It’ BNPL program, providing a tailored way to manage larger purchases. This plan is not available in Quebec, Nova Scotia, Prince Edward Island, and Nunavut. The fees associated with ‘AMEX Plan It’ are variable and depend on your location and the amount you choose to finance.

For instance, let’s consider a $500 purchase with a 10% annual interest rate. If you opt for a 12-month plan, the total fee is calculated by multiplying the balance by the installment fee percentage and the number of months. For a 10% annual rate, your monthly installment is calculated by dividing the total amount, including the fee, by 12.

In this example, the fee for a $500 purchase would be $50 (10% of $500), making the total amount $550. Dividing this by 12 months, your monthly payment would be approximately $45.83. This results in an annual interest rate of 10%.

Credit card eligibility

  • Most cards except Amex Charge Cards
  • Best Options:
    • AMEX Cobalt Card
    • SimplyCash Preferred Card (from AMEX)
    • Marriott Bonvoy AMEX Card

MBNA payment plans

MBNA has their own type of BNPL payment plans (which are not available in Quebec). These plans allow for durations of 6, 12, or 18 months, with a single fee based on the total amount and the chosen length.

For a $500 purchase at a 6% annual interest rate over 12 months, the fee is calculated as follows: 

$500 x 6% = $30

Adding this to the initial amount gives $530. Dividing by 12 months, the monthly payment is about $44.17. The total fee of $30 equates to an annual interest rate of 6%.

Credit card eligibility

  • Most cards except cards with interest rates lower than 12.99% (MBNA True Line Mastercard & MBNA True Line Gold Mastercard)
  • Best Options:
    • MBNA Rewards Platinum Plus Mastercard
    • MBNA Rewards World Elite Mastercard

Brim financial flexible payments

Brim Financial’s BNPL also aren’t available in Quebec but for the rest of Canadians, they’ll be able to use their ‘Flexible Payments’ system. These plans have a fixed fee of 7% of the overall price and a monthly processing fee of 0.475%, with an annual interest rate of 12.7%.

For a $500 charge over 12 months, calculate the 7% fee, which is $35, added to the first payment. The monthly fee of 0.475% amounts to $2.38 per month. The first payment is $76.54, and subsequent payments are $43.54.

The calculation is: 

  • First payment = ($500 / 12) + $35 + $2.38 = $76.54.
  • Subsequent payments = ($500 / 12) + $2.38 = $43.54. 

This totals $566.48, giving an annual interest rate of 12.7%.

Credit card eligibility

  • All cards:
    • Brim Mastercard
    • Brim World Mastercard
    • Brim World Elite Mastercard

CIBC pace it

CIBC’s Pace It Buy Now Pay Later plan includes a 2% one-time installment fee and a variable monthly interest rate, with an annual rate of 6.4%.

For a $500 purchase, the one-time fee is $10 (2% of $500). Assuming a 12-month plan, the total amount, including interest, is divided by the number of months. For a total cost of $510 at a 6.4% annual rate, the monthly payment is approximately $42.50. This reflects an annual interest rate of 6.4%.

Credit card eligibility

  • Some card support
  • Best Options:
    • CIBC Dividend Visa Infinite Card
    • CIBC Aventura Visa Infinite Card

Scotia selectpay

Lastly, Scotiabank’s SelectPay BNPL system comes with terms ranging from 3 to 12 months, with varying rates applied to the total amount.

For a $500 purchase over 12 months at a 5.3% annual interest rate, the fee is $26.50 (5.3% of $500). Adding this to the initial amount results in a total of $526.50. Dividing by 12, the monthly payment is about $43.88, reflecting an annual interest rate of 5.3%.

While there definitely are differences between these BNPL programs, the monthly payments are very similar. Other aspects often play a bigger role when it comes to determining which card issuer’s BNPL plan is the best for you (e.g. credit card benefits, bonuses, etc.)

Credit card eligibility

  • A few Scotiabank Visa cards
  • Best Options:
    • Scotia Momentum Visa Card
    • Scotiabank Passport Visa Infinite Card
    • Scotia Momentum Visa Infinite Card

Alternatives for ‘buy now pay later’ in Canada

Lines of credit

Lines of Credit are an alternative to ‘Buy Now, Pay Later’ plans. With a line of credit, you gain access to a specific amount of funds from which you can withdraw as needed. The key advantage here is flexibility; you only borrow what you require and consequently, you only pay interest on the amount used.

This option is especially appealing for those who face varying expenses over time. While some lines of credit may only require you to pay the interest as the minimum monthly payment, it’s advisable to pay more whenever possible. Paying only the interest can prolong the debt indefinitely.

Low-interest credit cards

Low-interest credit cards are another useful alternative to ‘Buy Now, Pay Later’ plans in Canada, especially for people who want more control over their repayment schedule. These cards differ from standard credit options by offering significantly lower interest rates, allowing for more affordable debt management.

While most traditional credit cards come with interest rates of around 20%, low-interest credit cards typically offer rates as low as 13% or even less. This reduced rate can lead to substantial savings over time, particularly if you carry a balance.

One key thing to keep in mind is that these low-interest cards often do not provide rewards programs. Their primary focus is on cost-saving through lower interest rates. This makes them an excellent choice for those who prioritize straightforward, cost-effective credit management over additional perks.

Personal loans

Lastly, you can choose a personal loan as an alternative to BNPL plans. Personal loans are a choice for managing larger purchases. When you sign up for a personal loan, you receive a fixed sum of money that can be used for a variety of purposes, providing a level of flexibility in its use.

A key feature of personal loans is the predictability of repayment. You agree to a fixed repayment schedule, usually with stable monthly payments over a predetermined period. This setup can be particularly beneficial for people who prefer a consistent payment plan.

About The Author