Buy Now Pay Later vs Credit Card | Buy Now, Pay Later Options vs. Credit Cards: Everything You Need to Know
Buy Now, Pay Later vs. Credit Cards (Representative Image) | Photo credit: iStock images
Credit cards have definitely made our lives easier. It allows you to buy things even if you don’t have any money in your bank account at the moment. So even if your account balance isn’t enough to shell out cash, a credit card can be a big help.
Often times, if you don’t have a credit card or if your credit card application is rejected, there is another no-card option you can choose from: “Buy now, pay later”. So, with this option, you can get interest free credit if you repay the amount on the due date. It allows you to buy something you want now and you can pay for it later.
The credit card, on the other hand, provides an extension of money that you can use to make purchases. Thus, you borrow money and you have to repay it when due, otherwise you risk interest and fees. It offers other perks such as generous rewards, lounge access, travel insurance and much more.
Below are some of the differences between Buy Now and Pay Later and the credit cards you should be aware of.
- Application process
You can create a Buy Now Pay Later (BNPL) account instantly without much hassle as credit card application is a tedious process and it can be time consuming. BNPL is therefore much easier to access than a credit card. This is very beneficial for people who have no income or who have other debts to repay. It involves no credit checks, no debts discussion, no income assessment and much more. The ease of application can turn out to be a big drawback and you have more freedom in your spending.
- Instant access to funds:
BNPL gives you instant access to funds whether you shop online or in store. On the other hand, when you apply for a new credit card, you wait weeks for it to arrive and then access the funds. So in either case, you have instant access to funds which can be a problem for people who are used to overspending.
Buy Now Pay Later allows users to share the cost of their purchase without paying interest. To some extent, credit cards typically offer interest-free periods on purchases that are roughly the same time as the Buy Now Pay Later refund window. Plus, you don’t need to make installment payments during this interest-free period, unlike BNPL.
- Credit limit
You are provided with a credit limit when you apply for a credit card. However, some BNPL services work in the same way. Other departments evaluate each purchase and decide to approve it. Having a credit limit can help limit spending. If you don’t have a limit, they can keep spending too much and then let their BNPL service decide.
Credit cards are accepted in millions of places around the world. The BNPL service is growing rapidly and also allows users to access the services in many places. However, it’s hard to find a place that doesn’t accept plastic.
In the case of a credit card, if you carry a balance, you are likely to pay interest and annual fees. BNPL is basically free when you don’t have to pay interest and fees if you make the payments on time. If you pay off your credit card balance each month, you can avoid interest on most cards.
BNPL and credit card both have consequences if you don’t make a payment. In the case of BNPL, you have to pay the fees and if this is not done on time, you may be banned from making further purchases. In addition, you may be reported to credit bureaus if you regularly miss your payments and thus your credit score will be affected. By credit card, you also have to pay late fees and interest. In addition, it can also affect your credit score.
The credit card offers a number of benefits ranging from travel insurance and access to airport lounges to free flights. However, the Buy Now and Pay Later services are weak in terms of benefits.
India’s architects of the future will set the growth agenda for this golden decade, at the Times Network India Economic Conclave – March 25, 26 | New Delhi. Watch LIVE coverage from the ground on Times Network News and www.india economicconclave.com.