Buy now pay later vs credit cards! Which option is better

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Buy now pay laterBNPL) is a payment option given by select online merchants and fintech companies to buyers for purchases they make. It is a short-term finance option that allows consumers to pay in installations or lump sum within a stipulated time period for any financial transaction.

The BNPL formula has tasted success which led to further introduction of this mechanism in a newer format such as BNPL card† BNPL cards are prepaid instruments with a credit line attached and it expands the available credit line to consumers beyond online platforms to include offline, point-of-sale touchpoints also.

Currently, there are quite a few players in this BNPL space such as LazyPay, Slice and Uni amongst others. These BNPL platforms offer the card facility to ease payment complexities for their consumers. BNPL cards are emerging as a powerful instrument and an alternative to paying from savings, credit cards. Individuals having limited credit options are also adopting it, reflecting a growing payment trend as Indians, especially young consumers, are increasingly opting for the solution for its convenience, accessibility and affordability.

How BNPL is different from credit cards

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While credit card is a widely used payment instrument, not everyone applying for a credit card gets one as financial institutions approve based on certain parameters and strict eligibility conditions.

In contrast, BNPL can be a preferable option for consumers with limited credit history as it grants them access to short-term credit by leveraging data and technology for robust underwriting.

BNPL cards come with a stronger reward structure. With every transaction, consumers can get exciting cashback rewards, making their transactions valuable. Credit cards also provide rewards; but, these are usually in point form and are limited to the merchants that the credit card company has a tie-up with.

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Application process for BNPL and credit cards

The application process for both these instruments is distinct, where there are some lev-els of documentation and financial approvals needed in getting a credit card sanctioned. On the other hand, application for a credit line via BNPL is a faster and hassle-free process with limited documentation.

Charges and refunds

BNPL allows purchases in installations with usually low or no interest charges. The free credit period can go from days to months. In the case of credit cards, a customer has to usually repay in a month’s time or maximum 50 days. The charges can add up quickly if one doesn’t pay the balance in time.

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