‘Buy Now Pay Later’ or BNPL is a short-term financing service extended by several modern fintech companies across the country. As the name suggests, the Buy Now Pay Later facility expects the consumer to make use of this facility for making purchases on merchant platforms and pay back the amount after a duration of 15 to 30 days.
Here is all you need to know about Buy Now Pay Later:
What is Buy Now Pay Later?
Buy Now Pay Later or BNPL is a financing option available to consumers to buy something from websites or application of the partner merchants and repay it in three or more easy installments interest-free.
The BNPL platform makes the payment to the merchant on your behalf. This facility has been able to attract many millennial, cash-strapped consumers who do not have access to credit cards. The user is expected to complete the KYC facilities on the BNPL platform.
After the verification is complete, the user can make purchases worth Rs. 500 to Rs. 30,000. Some BNPL platforms allow you to make purchases even close to Rs. 1 lakh.
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What can be purchased using BNPL?
A variety of items including shopping, apparel, food delivery, travel booking, and groceries can be purchased using BNPL. Many major platforms like Amazon, Flipkart, etc. have also started to offer BNPL facilities.
Where can you opt for BNPL?
There are several modern fintech companies like Simpl, LazyPay, CASHe, Kissht, and MoneyTap that have entered the BNPL space to offer a solution to the consumers. Even traditional banking giants like ICICI Bank and HDFC Bank have also started to offer BNPL solutions to their consumers.
How does BNPL compare with credit cards?
BNPL is a financing solution that is more suitable for individuals who do not have access to credit cards. As compared to credit cards, BNPL has the following factors that should be considered:
- The credit limit on BNPL is lower than a credit card
- The interest-free window on BNPL is relatively lower than credit cards. While credit cards offer a 30 to 45 days interest-free window, BNPL offers a 15 to 30 days window.
- You can expect rewards and cashback in making credit card spends. For BNPL, you can expect cashback on merchant platforms for using BNPL facility that are comparatively lower than credit cards.
- Credit cards usually charge an annual amount for using credit cards along with a one-time joining fee. There are no such charges for using the BNPL facility.
- Interest rates on credit cards after missing the due date are relatively higher at 36 to 45% as compared to up to 30% interest on the BNPL facility.
- Eligibility criteria for a credit card are much stringent as compared to a BNPL facility
- You have the option to make a cash withdrawal against your credit card (though you shouldn’t use it!). There is no such option available with a credit card.
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How to use BNPL?
There are certain best practices that you can follow for using the BNPL facility. Some of the important points are as follows:
- You should follow the repayment schedule and ensure that you repay the due amount in full before the due date.
- Any delay in making repayment will not only attract interest but will also result in hampering your credit score.
- Do not opt for too many BNPL facilities across platforms in a short period. It can be a hassle to keep track of multiple credit lines.
- If you continue to make repayments on time, the BNPL platforms may increase your credit limit.
- You can fall into a debt trap in case you are not disciplined in making purchases and following the repayment schedule.
BNPL is one of the most attractive credit options for individuals who do not have access to credit cards and other financing options. BNPL can be useful in making small and big purchases as per your requirement.
Rather than asking your friends and family for some credit when you are short on funds, it is better to opt for a BNPL facility that will be able to provide you with instant support with additional funds for making purchases across a variety of platforms.
