The two prominent payment methods that have emerged and are formidable contenders of each other are BNPL vs Credit cards.
These two payment options have provided consumers with the flexibility, convenience to pay their payments without any hassle. Over time these two methods of payment have become popular among the consumers and have been used repeatedly.
What is BNPL?
One of the popular financing tools that has flooded the payment processing market. BNPL, the acronym that has been used to refer to “Buy Now Pay Later”, is a short-term financing/payment method through which consumers can make purchases of any product or service, and pay for it later.
The method has become prominent among consumers recently, as paying through BNPL, consumers need not to make full payment at once, it allows them to make payments for their purchase later.
The BNPL method is like an installment plan through which the money lending process becomes easy and involves consumers, retailers, merchants, etc. The payments are repaid in a defined time period.
As compared to credit cards, BNPL service is easier to avail and use. If the payments are not paid on time, it can affect your credit score. Getting loans under BNPL is much easier than getting from credit cards.
Note: Also, visit our article Credit card and its benefits.
BNPL vs Credit Cards
| Factors | BNPL | Credit Cards |
| Process | A simple & instant process, only requires KYC and PAN card to be submitted. | Lengthy & complicated process, requires several documents & approvals. |
| Interest Charges | Offers interest free period for a specific duration. | Charges higher interest rates than BNPL, specially in the unpaid balances. |
| Joining Charges | No fee is charged | Joining fee varies with different credit cards. |
| Credit History | Is accessible without having any credit history. | Credit history & creditworthiness is assessed by the credit card issuers before approving the credit card. |
| Repayment Facility | BNPL provides the facility of treating it as a separate installment & manage payments. | This gives the option to choose the minimum or full amount to be paid every month. |
| Credit Limit | Offers lower credit limit, cannot offer more than Rs.60,000. | No such credit limit is there and it usually depends on the creditworthiness of the user. |
| Eligibility | Easier and relaxed eligibility criteria. | Has a fixed and determined eligibility criteria. |
| Payment Cycle | 6 to 12 weeks. | Varies with different credit cards. |
| Rewards | No such rewards and offers are provided. | Users usually get rewards, offers, extra deals, etc. |
| Payment Points | At selected retailers or merchants. | Extensive and wide range. |
| EMIs Option | Offers convenient repayment plans with no interest rates. | Offers EMIs payment option with interest rates. |
| Payment Channels | Accessible through mobile phones. | Is available through phone and card. |
Process – In the case of process, for availing the BNPL payment method, the user does not need to wait for a long time, instead they need to fill a KYC form along with the submission of a PAN card copy.
While in the case of Credit cards, the process is a bit complicated and long. It requires you to submit important documents like address proof, identity proof, etc. or might even visit the bank for the process.
Interest Charges – If we look at the Interest Charges both, then BNPL becomes the convenient option as it offers interest rate free period on their EMIs, offering users to avoid paying any extra penalty if the amount is paid in the given time. If the amount is not paid in the specific duration then the user might need to pay the extra charges. While the credit cards have a fixed interest rate on their EMIs.
Joining Charges – In this factor BNPL tops. As in BNPL, it requires zero joining charges while joining charges in credit cards vary differently according to the card, and some even come with annual or no annual fee.
Repayment Facility – In BNPL, the transaction and purchases are considered under separate installments and helps in managing payments better. In credit cards, they provide the option to choose the minimum or full amount to be paid every month, making it suitable and convenient for the users to repay the amount.
Credit Limit – The credit limit offered by BNPL is low as compared to credit cards, it usually upto Rs.60,000, while looking at credit cards does not offer as such credit limits, it usually depends on the creditworthiness of the user and the credit card they are purchasing.
Eligibility Criteria – The eligibility criteria of credit cards has a fixed and determined process. Things like credit scores, history, ability to repay the amount, payment slips, etc. are being looked after, but in BNPL the eligibility criteria is simpler and easier.
Payment Cycle – The payment cycle i.e. the time that has been provided to payback the amount in BNPL usually lasts between 6 to 12 weeks, while the payment cycle period in credit cards varies differently with each credit card. On an average it lasts between 18-48 days or between 20-55 days.
Payment Points – BNPL is only available at selected retailers or merchants, and not on every shop or platform, while the credit cards lead this factor, and can be used and is available at a wide and extensive range.
Pros & Cons: BNPL vs Credit Cards
BNPL Pros & Cons
| PROS | CONS |
| No interest charges (for a specific time) | If not paid the amount in the specific time, additional / penalty charges may be applicable. |
| Easy approval | Can be used with certain purchases only. |
| Doesn’t requires credit scores | Doesn’t help in building a good credit score. |
| Fixed installment plans & durations | Can encourage overspending. |
Credit Cards Pros & Cons
| PROS | CONS |
| Widely used & accepted. | High interest rates. |
| Offers rewards, offers, & other deals. | Managing high balance can be tough. |
| Helps in building good credit score | Requires a good credit score for availing the card. |
| Provides flexible repayment amount & date every month. | Can come with a variety of associated fees. |
Note: Do check our article, Apps like Slice that provide Credit cards.
Summing Up: BNPL vs Credit Cards
While BNPL offers the interest free EMIs for a specified time and allows payment later, on the other hand, credit cards offer a wide range of acceptance, plus the rewards and offers that come along with the card.
Deciding between the two, leads to the spending preference, deals, and the budget of the customer.
