Buy now and pay later compared to credit cards! Which option is better

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Buy now pay later (BNPL) is a payment option offered by some online merchants and fintech companies to shoppers for purchases they make. It is a short-term financing option that allows consumers to pay in installments or in a lump sum within a stipulated time frame for any financial transaction.

The BNPL formula enjoyed success which led to the introduction of this mechanism in a new format such as BNPL card. BNPL cards are prepaid instruments with an attached line of credit and they extend the line of credit available to consumers beyond online platforms to also include offline touch points at the point of sale.

Currently, there are quite a few players in this BNPL space such as LazyPay, Slice, and Uni among others. These BNPL platforms offer the card facility to ease payment complexities for their consumers. BNPL cards appear to be a powerful instrument and an alternative to payment using savings and credit cards. People with limited credit options are also adopting it, reflecting a growing payment trend as Indians, especially younger consumers, are increasingly opting for the solution for its convenience, accessibility and price. affordable.

How BNPL is different from credit cards

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Although the credit card is a widely used payment instrument, not everyone who applies for a credit card gets one because financial institutions approve it based on certain parameters and strict eligibility requirements.

On the contrary, BNPL may be a preferable option for consumers with limited credit histories as it gives them access to short-term credit by leveraging data and technology for strong underwriting.

BNPL cards come with a stronger reward structure. With every transaction, consumers can earn attractive cash back, which makes their transactions valuable. Credit cards also offer rewards; but, these are usually in the form of points and are limited to merchants with whom the credit card company has a connection.

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Application Process for BNPL and Credit Cards

The application process for these two instruments is separate, where certain levels of documentation and financial approvals are required to obtain a sanctioned credit card. On the other hand, applying for a line of credit through BNPL is a faster and hassle-free process with limited documentation.

Fees and reimbursement

The BNPL allows purchases in installments with generally little or no interest charges. The free credit period can range from a few days to several months. In the case of credit cards, a customer usually has to repay within a month or maximum 50 days. Fees can add up quickly if the balance is not paid on time.