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Credit Card vs BNPL: Which is Better and Why?


Credit Card vs BNPL: Which is Better and Why?

  • By Saral Credit
  • February 01, 2022

Years ago, plastic money was the only mode to make purchases. Often, people utilize credit cards to make purchases and pay the bill afterward. This trend is still in fashion. However, in the recent past, the concept of Buy Now Pay Later (known as BNPL) has been growing. Yes, BNPL is a financing option that has outranked the need for credit cards to make purchases without worrying about cash. Undoubtedly, BNPL has nurtured the users and provided a smart way to buy any product and pay in the future without interest.

This brings a big challenge for online shoppers to choose between the two and make a smart move. The best way to choose one is to compare both options over various aspects.

Before that, let's take a glimpse of what these two options are:

What is Buy Now Pay Later option?

'Buy Now Pay Later' as the name suggests is an option that allows you to make online purchases and pay the entire amount via no-cost monthly EMIs. Like a credit card, BNPL lenders also provide you with easy credit for online purchases and turn them into monthly EMIs with no additional charges or interest.

What is a Credit Card?

Well, a credit card doesn't need any introduction. Yet, for the readers, a credit card is plastic cash that allows you to spend up to a specific limit (depending upon your credit score) and repay it in either a single billing cycle or EMI.

There are numerous aspects where it's essential to compare these two online shopping options and find the best choice for you. So, let's run a head-to-head comparison of these two.

Repayment Tenure: A credit card allows you to convert your online shopping into monthly EMI for a duration of up to 12 months. However, this duration can extend up to three years, depending on the available offer. In comparison, the BNPL option gives you an EMI option for a shorter span. Usually, the repayment duration lies between three to twelve months. However, it primarily depends upon the terms and conditions of the lender.

Credit Period: The standard time to repay your overdue bills is 45 days. However, the BNPL has a standard time of 15 days to repay the bill if you haven't turned your online purchases into EMIs.

Different BNPL lenders provide you with different initial credit and interest-free periods. Given table gives you better knowledge about the BNPL credits and interest-free period for popular BNPL lenders.

BNPL Lender

Initial Credit*

Interest Free Period

Flipkart Pay Later

Rs 10,000

up to 35 days

Amazon Pay Later

Rs 10,000

up to 45 days

HDFC Bank FlexiPay

Rs 1000 - Rs 60,000

up to 15 days

ICICI Bank Paylater

Rs 5000 - Rs 20000

up to 45 days

Lazypay Pay Later

Rs 500 - Rs 9999

Up to 15 days

Mobikwik Zip

Rs 500 - Rs 30000

Up to 15 days

* For one month

Fees Associated: Undoubtedly, nothing comes for free. So, both the options have some charges/fees associated with them. When it comes to traditional credit cards, they have annual maintenance and renewal fees which vary from one bank to another. Similarly, BNPL also comes with or without such fees. The only aspect where BNPL differs is that it doesn't charge processing fees charged by most credit cards whenever you convert a standard purchase into monthly EMI.

Interest Rate: In the case of BNPL option, you are only charged if your repayment duration is longer than the interest-free credit period. However, the interest rate is usually lower based on different fintech players' schemes.

In the case of a credit card, you are charged with a standard interest of 13% to 15%, depending upon your repayment duration. However, depending upon the ongoing offer, you can also get an interest-free repayment option for up to 1 year.

Eligibility Criteria: A credit card is an option that is only offered to limited people. Most people with a handsome credit score can get a credit card with a decent credit limit. However, most people easily qualify for the BNPL option, making it a quick and exciting option for every online shopper.

BNPL is the best option for young employers who have started earning but fail to qualify for the credit card eligibility criteria.

Available Credit Limit: Everyone must know how much you can spend with a credit card or a BNPL credit? Getting a personal loan is the smartest available option if you require high credit. With BNPL, you can make a maximum online purchase of INR 60,000 after getting an OTP-based KYC done. It means in an entire financial year; you get a total of INR 60,000 to spend.

When it comes to a credit card, you have a pre-approved credit limit that you can use for various options, including online shopping. The limit of a credit card entirely depends upon your credit score and your financial habits. Interestingly, the credit limit increases with time if you are a disciplined user and repay your overdue bills on time.

Bargain Limit Availability: Undoubtedly, a credit card comes with tons of offers maximum time you use your card. However, when it comes to a specific brand or bulk purchase, you might fail to get an unrejectable offer. This brings the option of BNPL into the limelight. The BNPL option sometimes gives you a better option to bargain on the specific order/transaction you want to make.

However, this doesn't happen in every aspect. The availability of bargain limits and exciting offers entirely depends upon the current situation and brand tie-ups with multiple payment banks. The reverse of this situation is also true in real life. Moreover, you also get reward points that can help you get additional cashback with every purchase. Cumulatively.

Availability for Use (Application Stage): Credit card has a lengthy application process that is short in the BNPL option. From request submission to receiving your credit card, the entire process takes about 2-3 weeks. In comparison, BNPL doesn't have an application process. Instead, you can get the approval for BNPL credit lime almost immediately. Starting with as low as INR 1,000, you can use the BNPL option and turn your transactions into zero-cost EMI. In short, the BNPL option outranks the credit card when it comes to the application process.

Another aspect of a credit card is its time to complete the transaction. Once you are at the checkout stage, you use your credit card and submit the card details. This takes time which annoys many online buyers. The process of using a credit card for online transactions includes submitting your card details, getting the OTP on your registered mobile number, and then submitting it back for authentication. This takes a short yet significant time compared to BNPL. In BNPL, all you need is to submit one authentication step omitting the traditional card detail filling.

Universal Acceptance: It's important to note that the use of digital cash isn't limited to online shopping. Credit Cards and BNPL are practical options in online shopping. It means you can take advantage of both these options in online purchases. E.g., Amazon, Flipkart, Snapdeal have the option to pay via Credit Cards and Buy Now Pay Later option. Further, Amazon has rebranded its Amazon Pay EMI to Amazon Pay Later. However, it's important to note that Amazon has a tie-up with Capital Float or IDFC Bank to provide you with the Pay Later option.

Impact on Credit Score: A strong credit score is highly beneficial for maintaining good relations with finance companies and getting any type of loan hassle-free. In case you have a bad credit score, it will affect you in getting a personal loan, home loan, or other types of loan. If you skip repaying the credit card overdue bills on time, your credit score is badly affected. On the other hand, BNPL also impacts your credit score adversely. So, it's always good to repay the bill without any delay and maintain a clean financial repayment cycle for every type of loan.

However, keeping online shopping aside, credit card has universal acceptance. It means you can use a credit card to buy fuel, pay bills at restaurants, malls, etc. However, BNPL is only limited to eCommerce purchases. Until UPI-based BNPL funding, you can't use this facility to all credit card applicable places.

Over To You:

With that said, you have a clear comparison between credit cards and Buy Now, Pay Later option. You get a tenure of up to 45 days to repay the bill and clear your dues with a credit card. So, if you already own a credit card, you should check the repayment tenure that can help you manage the amount on time and repay it without any penalties.

You should always research thoroughly between using a credit card or BNPL option for your purchases. Moreover, check for the available offers that best match your needs. Do let us know which of these two options are you presently using and why?