Are BNPL Schemes Better Than Credit Cards?

Buy now pay later (BNPL), the latest entrant in the credit space, has become popular because it allows immediate access to credit even for small-ticket purchases and, typically, without the need to go through any paperwork or documentation.  

Credit cards, EMI cards and BNPL products have many common features and some that differ. Understand the nuances of each to make an informed choice and make the best use of the different facilities they offer. 

Interest-free period: As of now, BNPL provides the longest interest-free period of up to three months. But all don’t offer long interest-free periods, which can be as short as 15 days also. In comparison, credit cards, typically, provide an interest-free period of 45 days. EMI cards allow you to settle your credit through EMIs over a fixed period of time, which varies. This is also known as the No-Cost EMI option that most physical stores offer.  

Offers: Credit cards offer reward points that can be used for subsequent purchases, as per the card’s policy. Some card issuers also allow their users to redeem their accumulated reward points for paying off their credit card bills. However, the reward points are, typically, revoked if you opt for the credit card EMI facility.  

Carefully compare the various cashback or discount offers available on goods or services to be purchased through BNPL schemes and credit or debit cards. Opt for the mode that costs the least interest and/ or earn the highest discount/cashback.  

Availability: Credit cards are widely accepted, for offline as well as online purchases. EMI cards are mostly availed of on consumer durables. However, the facility, both online and offline, is available only with select merchants. BNPL, too, is at present offered by select online and offline merchants.  

There is a lot of choice available in short-term small-ticket loans. Lack of credit history is no longer a deterrent for small loans. However, each of the products described above—credit cards, EMI cards and BNPL—is a loan and should be treated as such.  

The way to make the best use of these is to take credit as per your repaying ability. Avoid impulse buying, and pay back on time.