July 3, 2025 · 11 mins read
Santhosh Kumar
Shoppers often dream of a genie that helps them buy their favorite things without charging their credit or debit card. The newest genie in town is ‘buy now pay later’ (BNPL). According to research, over 60% of consumers have used this method to buy goods and services online. While BNPL is more or less like a credit card that lends us credit for purchases, BNPL doesn’t force its users to pay the used credit at the end of the month. Due to their easy signups and convenient usage, customers show a preference to buy now and pay later than other methods of payment.
Buy Now Pay Later is a financial program that lends credit to purchase things online, which can be returned in installments within a short interest-free period. So, without spending out of their pocket or swiping their credit/debit cards, the customer can make the payment. Focused on demographics that are frequently short on money, BNPL also grants its users frequent cash backs and offers. From shopping online to making utility payments, one can rely on buy now pay later for short-term financial requirements. The payment and installment schedules of BNPL vary per retailer and per card provider.
Buy now, pay later service providers collaborate with retailers like Amazon, Flipkart, etc, and offer their payment mode as an option at the end of the checkout process. Customers can create their accounts with BNPL and finish their payments. The BNPL provider pays on the customer's behalf and levies the customer in installments. If all the dues are paid on time, there won't be additional charges. For every missed or delayed payment, an additional charge will be applied. Certain pay-later providers request the customer to make a small down payment, which is a part of the overall price of the product.
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Users don’t have to fill out long forms to sign up for buy now, pay later schemes. The signup process won't even take 2 minutes, as all it requires is your contact information and documents pertaining to the bank account. As the eligibility requirements are relaxed, anyone can easily meet them and get approved within a day or even instantly. Additionally, buy now, pay later can be very resourceful to make emergency purchases for customers who cannot have credit cards or don't want to have credit cards.
Having no credit score can affect your prospects of getting financial assistance from lending institutions in the future. You will need this score as an assurance to prove that you have a good payment history. While obtaining a credit card can be an uphill battle here, BNPL cards will have your back. You can use buy now, pay later solutions to pay your monthly bills and repay them on time to build a good credit history.
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You do not have to pay a hefty bill at the end of your billing period. Instead, you can take up one-time or EMI payments that would let you take advantage of stretched-out repayment schedules. You can calculate your financial potential and choose how you want to repay. This privilege is not available with credit cards or any other lending systems.
BNPL providers don’t usually go for a full-on credit history check before approving an application. They don't request your full credit history with your entire repayment data from the bureau, which can impact your credit and reduce it even more.
Since the amount is not going to be paid anywhere around, buyers feel the urge to invest in things they don’t even need. Though it’s beneficial to merchants, buyers fear going broke as BNPL is always just a purchase away.
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Interest-free lending is fine. But if the customer isn't able to pay due to some reason, the interest amasses within a short period, and it's higher than the credit card interest rate. If two or more dues go missing, the overall amount to bear is a lot higher than the actual price.
The concept of BNPL is still new for many shops and vendors. Hence, they take time to understand how it works. For this reason, you won’t be able to use this with every vendor, or it can take time for that to be accepted universally.
Missed payments cost you a lot of money and whack your credit score, too. It takes immense effort to build the score to a positive level, which can be blown out in a few days.
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Credit cards are one of the most convenient and widely accepted payment methods. Credit cards allow for quick and easy transactions both offline and online and also eliminate the need to carry cash.
Responsible usage of credit cards can help individuals to build a positive credit history. Timely payments and low credit utilization can help improve credit scores, which can be beneficial when applying for business loans or mortgages in the future.
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Most credit cards come with reward programs that offer cashback, points, discounts, or even airline miles for eligible purchases. These rewards can be later redeemed for various purposes.
Debt accumulation is one of the major drawbacks of credit card usage. Debt accumulation arises when a business spends more on their credit cards than the amount they can afford to repay in full each month. If not managed carefully, credit card debt can accumulate quickly and become a financial burden for your business.
Businesses are at risk of paying a high interest if they don't pay off their balance in full each month. Businesses must be mindful of interest rates and fees and ensure responsible usage to avoid financial pitfalls.
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The possibility of overspending is one potential downside of using credit cards. With the convenience credit cards offer, businesses tend to overspend and may end up building a pile of debt that becomes difficult to repay.
We are already accustomed to paying later with credit cards and have been using them for a while. The significant difference is that you can use the credit card anywhere with any vendor, whereas BNPL can only be used with the selected vendors they have tied up with. Other than this, the main differences between credit cards and buy now pay later are as follows,
If it’s a credit card, you will have a monthly repayment cycle. The user will repay the used credit without interest if the payment is made within the billing cycle. On the contrary, BNPL has a repayment period that can span several weeks or months. The customer will be informed in advance when the payment is due and must pay it on time.
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Pay-later credit cards offer the same standard interest-free duration, ranging from one to 45 days, including a quick grace period. Any amount paid beyond that will incur an interest rate of 3 to 5%. Buy now, pay later schemes have a distinct pattern for levying interest here. They usually show an upfront repayment schedule, and if it's missed, an interest of 10 to 20% will be charged along with a late payment fee. If the amount is paid in EMI, which extends for a duration of 48 months or more, it comes with an interest rate.
Another prominent way the BNPL program differs from credit cards is that it has a transparent pricing model, unlike credit cards, which often arrive with hidden charges.
Credit cards offer potential discounts or bonus points for purchases with specific vendors or all payments. A majority of perks are offered to merchants that the credit card provider has partnered with.
BNPL offers cashback offers too for every transaction above a certain limit. Customers can significantly save a lot with large buy now, pay later transactions.
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Eligibility criteria are almost the same for credit cards and pay-later cards, though the minimum requirements vary from one lending institution to another. Credit card plans have different cards and schemes to suit the buying potential of customers.
So, to prove creditworthiness, the applicant for a credit card should produce salary slips and be a salaried employee or self-employed worker. There are certain credit cards that are not applicable to non-citizens of the country. The minimum age limit to obtain a credit card is 18, whilst it's 20 for BNPL cards.
To use buy now pay later services, one must be a salaried employee who has an active bank account and must reside in tier 1 or tier 2 cities (within serviceability regions of the BNPL agent).
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1: There is an interest charged for the total loan amount offered to the lender.
2: The limits of the principal amount offered are high. It can go up to 50,000.
3: Extended tenure. One can take up to 3 years to repay the loan, and the amount is split based on that.
4: Long documentation process and waiting time to get the loan approved.
1: No interest is charged for the principal amount offered unless the dues aren’t paid on time.
2; Maximum offered credit is lower than bank loans and, in some cases, credit cards too.
3: Short tenure. Should be paid within 6 months to 1 year.
4: Can quickly sign up on the app or website within a few minutes and get approved instantly.
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Comparing the features of credit cards vs BNPL will help you choose the right one for yourself. While BNPL facilities may come with lower interest rates, you can only use them at specific retailers. Credit cards offer a variety of benefits, but the interest rates may be higher. In some cases, you can pay in EMis at zero interest using both BNPL and credit cards.
Credit cards are very versatile with their services, and yes, you can use them as a buy now, pay later option with the EMI conversion facility. You may need to pay a nominal processing fee and interest rate for this facility.
There are no particular eligibility measures for a BNPL facility, unlike a credit card. That being said, most financial institutions offer this facility to salaried applicants who are above the age of 18 and have basic KYC documents in place, like PAN and Aadhaar cards.
A BNPL facility is limited to giving you the option to purchase something now and pay the bill in monthly installments. A credit card offers many more features, such as giving you a long grace period to pay bills, having universal acceptance, giving you the option to convert bills into EMIs, offering discounts, and allowing you to earn reward points.
Credit cards are meant for salaried individuals with good credit scores. However, there are no such limitations for BNPL cards. If the person has these eligibility criteria, then they can obtain a BNPL card.
1: Indian Citizen
2: Between 21 to 65 years old
3: Salaried individual/ Self-employed
4: Considerable credit score
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