BNPL Vs Credit Cards Vs Personal Loans: Which One Is Right For You?



Credit cards score higher than BNPL for universal acceptability, as the latter is still limited to partner merchants only, although service providers regularly add hundreds of partners.

Consumers, especially millennials and Gen Z, are now looking for simplified microcredit solutions to better manage their recurring and one-off purchases, which can be requested easily and used transparently. All of these factors have led to the massive popularization of Buy Now Pay Later or BNPL services in India in recent years.

With over 30 targeted startups, a few e-commerce giants, and even leading banks and NBFCs now joining the movement, BNPL’s services in India are making rapid progress in customer onboarding, merchant partnerships and marketing. attraction of investments.

According to Bankbazaar, BNPL’s services have been part of the global digital lending ecosystem for over 15 years now. But the pandemic has been a spur to its massive popularity in the recent past in conjunction with the rise of e-commerce, deepening mobile internet penetration, and growing redundancy in cash transactions, especially in countries like China, the United States, Australia and India.

What is BNPL?

A BNPL service allows customers to make qualifying purchases that can be split into installments or repaid at a later date (during the repayment cycle) at zero to low interest charges. BNPL service providers offer clients short-term microcredits for specific purchases typically starting at Rs 2,000 and up to Rs 1 lakh in credit limits, with repayment cycles ranging from 14 days to 30 days (up to Rs 1 lakh). ‘to 90 days, in some cases) according to the terms and conditions of the service provider.

However, late payment penalties (and interest charges, in a few cases) could be levied for repayments beyond due dates, while BNPL providers can report late payments to credit bureaus that could be detrimental. to the credit ratings of these users.

BNPL service providers often use new-age mechanisms to assess customer creditworthiness and the entire customer onboarding and credit limit sanction process is typically completed digitally in minutes with minimal documentation requirements. A few players also offer pre-approved BNPL credit limits to certain customers, according to the Bankbazaar study.

BNPLs can currently be enjoyed on a growing number of e-commerce, food ordering, ridesharing, travel booking, online grocery and service websites, and even edu-tech portals among hundreds. other trading platforms. Transactions can be carried out seamlessly during payments in a safe and secure manner without having to enter card details or OTPs.

Some BNPL service providers also offer additional incentives to customers in the form of additional discounts or cash back rewards for enjoying their facilities, making timely refunds or on specific transactions. These instant fund offer platforms for consumer purchases typically earn money through merchant commissions and late fees, not interest charges.

How does BNPL compare to personal loans and credit cards?


Credit cards score higher than BNPL for universal acceptability, as the latter is still limited to partner merchants only, although service providers regularly add hundreds of partners. Credit cards also offer perks and privileges, helping users save more and access higher lifestyles through their transactions. The cards might offer higher spending limits although they may be more difficult to obtain in comparison due to the stricter underwriting standards. BNPLs have no annual, processing or renewal fees, which cards sometimes do. The critical differentiator, however, is the interest charges which are typically not levied on BNPL services – users have to pay a non-cumulative fee for late payments unlike credit cards, although some cards now also offer premiums. IME uninteresting.


Personal loans are expensive, versatile, unsecured financing facilities with much higher credit limits than BNPL’s services. However, higher fees apply, unlike BNPL. Another key differentiator is revolving credit – BNPLs offer this while personal loans don’t, as they are one-time loans. Also, age, income, credit rating, occupation, etc. of a client are reviewed by lenders to determine loan eligibility, although the loan application process and disbursement is quick for pre-approved loans. BNPLs, on the other hand, often use new-age mechanisms to check a borrower’s creditworthiness, which usually only takes a few minutes.


Credit cards could come with a wider range of benefits, a higher credit limit, and universal acceptability, but with cumulative interest charges for late payments. BNPL’s services are smaller but simpler credit facilities for consumer purchases from partner merchants often resulting in IMEs involving no interest charges but only one-off charges in most cases. They may also be easier to enroll compared to non-pre-approved credit cards. These factors make them ideally suited for users looking for short term microcredit facilities, especially those who are not eligible for credit cards.

Personal loans are intended for large financing needs, often during an emergency liquidity crisis, and are not recommended for smaller discretionary purchases due to the interest charges involved.

BNPLs, credit cards, and personal loans are different types of loans, but they all need to be used in a very disciplined manner. Users should not over-borrow and minimize their use to finance their lifestyle and consumption. They should read the fine print carefully, understand the fees and make sure their dues are always paid on time, advises Bankbazaar.

Credit cards and personal loans charge late interest. BNPLs charge a penalty. Careless use and late payments with any of these facilities can put a user’s credit rating at risk, affecting their chances of getting the best deals when applying for other loans in the future.

As far as BNPLs are concerned, they are a game-changer by offering transparent micro-credit solutions to millions of customers. However, wise use and the greatest financial discipline are essential to maximize the value of the loan, like any other credit product.

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