Credit Card V/S BNPL | MobiKwik

While credit cards are not a new concept, having been a popular method of purchasing goods and services for end users, they have faced stiff competition from alternatives in recent years. BNPL cards, also known as Buy Now Pay Later cards, are at the top of the list.

BNPL allows you to purchase what you require and pay later. While most features appear to be similar to credit cards, there are numerous parameters.

What is the difference between using a credit card and buying now and paying later? Is one more affordable than the other? Learn more in this article.

What is the Buy Now, Pay Later option?

As the name implies, ‘Buy Now Pay Later’ or Digital Credit is a payment option that allows customers to make online purchases and pay the entire amount later.

What is a credit card?

A credit card is plastic cash that allows you to spend up to a certain limit (depending on your credit score) and repay it in a single billing cycle.

The Similarities Between BPNL Cards and Credit Cards

BNPL cards, like credit cards, provide the cardholder with a credit-free period. Credit cards allow you to spread your purchases over a period of time, typically 12 months (sometimes longer, such as three years).

One of the similarities between credit cards and BNPL cards is interest-free periods. However, there are more differences than similarities in the big picture. Let’s see what they are.

Buy Now, Pay Later, and Credit Cards – Differences

Here are some of the differences between BNPL and credit cards, as well as how they affect the end user:

1. No-Interest Period

Although both options provide interest-free periods, their lengths differ slightly. Credit cards, for example, typically provide a 45-day interest-free period. In the case of BNPL cards, it ranges from 15 to 30 days.

2. Fee

Annual Fee: Credit cards inadvertently charge these fees. It can be a one-time fee or a yearly fee. With high-end cards, the fees can be exorbitant.

BNPL, on the other hand, has no joining or annual fees if you use MobiKwik Buy Now Pay Later. As a result, you can sign up for free and save your credit limit for later use.

Interest: In both facilities, you must pay interest if you do not repay the amount within the interest-free period. Credit cards have higher interest rates.

Processing Fee: There is generally no processing fee.

Similarly, many BNPL providers do not charge a processing fee.

3. The Credit Limit

There is a regulated credit limit on BNPL cards due to OTP-based KYC. The Reserve Bank of India (RBI) caps OTP-based KYC loans at Rs 60,000 per year.

On the other hand, the credit card limit is determined by the applicant’s credit score and annual income. So, if you need credit for larger purchases, a credit card could help, but with more restrictions and scrutiny.

4. Qualification

Credit cards have stringent eligibility requirements. Minimum income requirements, credit scores, and a track record of reliability are all required. Failure to meet the pre-defined criteria will result in loan rejection.

Buy Now, Pay Later, on the other hand, is not as stringent in its evaluation. Fintech or eCommerce companies provide quick and easy BNPL schemes.

You can use your credit line after you register for free and provide the necessary information. This is a major reason why BNPL cards are becoming popular among millennials, especially MobiKwik BNPL.

5. Ease Of Use

Applying for a credit card is time-consuming and laborious, requiring multiple verifications.

The majority of credit card applications are processed within 3-4 weeks. BNPL cards, on the other hand, are issued quickly and easily. A credit line is available in minutes.

You can complete your payments using BNPL cards with just one OTP verification. With a credit card, this is not the case. You must provide the cardholder’s name, credit card number, expiry date, and CVV for credit cards.

Finally, the transaction is completed only after entering an OTP sent to a registered mobile phone. Although it is a safeguard against scams and thefts, you can’t stand the process if you’re in a hurry.

6. Acknowledgement

The majority of BNPL schemes run by Fintechs are restricted to their partnered merchants. The same is true for eCommerce businesses. As a result, it does not work outside of the boundary.

Credit cards, on the other hand, are accepted worldwide. Almost every merchant, both online and offline, accepts credit cards.