Credit Card or Buy Now Pay Later: In today’s fast-paced world, short term finance options are being adopted more, among which credit cards and buy now pay later (BNPL) are the most popular. Let us see what is the difference between them so that if needed, you can choose one of them as per your convenience.
What is a credit card?
Financing companies issue credit cards, in which consumers can spend up to a limit. In this, the card holder pays back the amount spent with interest. There are many benefits of credit card such as it is easy to get everything from shopping to travel insurance etc. Many times, one also gets rewards in lieu of payment. Another specialty of credit cards is that they are adopted by most of the retailers in the world. If you repay the loan amount along with interest from time to time, your credit score also increases. In this, many rewards like travel miles, points, cash back are available.
Drawbacks of credit cards
However, credit cards also have disadvantages such as high interest rates. Some credit cards also charge an annual fee. In such a situation, it is important to use it wisely, otherwise the benefits obtained from it may be reduced. Your credit report is checked for taking loan in banks etc., hence avoid mistakes in its use.
What is Buy Now Pay Later?
In a way, BNPL is like a personal loan, which is used to make purchases on e-commerce websites. This option appears while making payment after shopping on the e-commerce website. On clicking this, some information like PAN card details are asked and after digital KYC, the loan is approved. In this, a message is sent telling you how much loan has been approved by the finance company and accordingly you can shop and make payment.
In this, you can return the loan money in one go or convert it into EMI. In ‘Buy Now Pay Later’ (BNPL), if the customer repays the money within the stipulated time, then he does not have to pay interest. However, it is important to find out how many days the interest free period is. In this, the time given for payment is 15 to 45 days and within the stipulated time, the amount is automatically debited from your account.
Dangers of Buy Now Pay Later
In ‘Buy Now Pay Later’ (BNPL) there is a risk of spending more than you can afford and if you do not repay the money within the stipulated time, then increased late fees are imposed. Sometimes it also has negative effects on your credit score. Sometimes, if the penalty is not paid, the bank account can also be blocked.
Which is better between credit card and buy now pay later?
If you want to improve your credit score or get the benefit of rewards, points or cashback, then credit card is best. On the contrary, BNPL offers interest free payment option on some purchases. If you have to spend occasionally or if you know that you will return the money at a fixed time, then ‘Buy Now Pay Later’ is best for you. Many times attractive discounts or deals are available in this also. Another specialty of BNPL is that it does not impose heavy penalties on late fees nor are there any hidden charges like credit cards.
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If you make budget according to this rule, your pocket will never remain empty, adopt the method of 50:30:20.
