Buy Now Pay Later (BNPL) vs credit card: Which is better for you

Know the key differences and find the best payment option for you.
Buy Now Pay Later (BNPL) vs credit card: Which is better for you
4 mins
25th July 2023

Consumers are often presented with multiple payment options to facilitate their purchases in today’s fast-paced world. Two popular methods that have gained significant traction are Buy Now Pay Later (BNPL) and credit cards. Each method has its merits and drawbacks, and understanding the differences between them is crucial to make informed financial decisions. In this article, we will delve into the differences between BNPL and credit cards, and what should you choose.

How BNPL differs from credit card

Factor BNPL Credit card
Definition Buy Now Pay Later (BNPL) allows customers to make purchases and pay for them in instalments over a specific period. A credit card provides a revolving line of credit that users can access to make purchases and repay the outstanding balance each month.
Interest charges BNPL often offers interest-free EMIs for specified durations, enabling users to avoid interest if the amount is paid within the given time. Credit cards typically involve interest charges on unpaid balances if the total amount is not cleared within the grace period.
Credit check BNPL providers may not require a traditional credit check for approval, making it accessible to individuals with limited or no credit history. Credit card issuers usually perform a credit check to assess the applicant's creditworthiness before approval.
Repayment flexibility BNPL transactions are treated as separate instalment plans, making it easy to budget and manage payments for specific purchases. Credit cards offer flexibility as users can choose to pay the minimum amount due or the full balance each month, making it suitable for both short-term and long-term financing.
Usability BNPL services are often designed for specific partner merchants or platforms, limiting their use to select outlets. Credit cards are widely accepted, allowing users to make purchases online and in physical stores globally.
Eligibility criteria Generally easier approval, which is often based on soft checks. Credit card eligibility criteria varies by provider and card type.
Credit limit It is usually a lower or a capped amount. The credit limit is higher and it usually depends on your creditworthiness.
Joining fee Typically there is no joining fee. The fee usually varies and may include an annual fee as well.
Easy EMI Offers flexible repayment plans with no interest. Allows conversion of purchases into EMI with interest charges.


The Buy Now Pay Later (BNPL) concept, exemplified by the Bajaj Finserv Insta EMI Card, offers an attractive alternative to traditional credit cards. BNPL allows consumers to make purchases and spread the cost over a specified period, often with interest-free options for a limited duration. Unlike credit cards, BNPL services may not require a credit check, making them accessible to a broader audience. Moreover, BNPL transactions are treated as separate instalment plans, making it easier to budget for specific purchases. On the other hand, credit cards provide more flexible credit access, with the ability to carry over balances and use them for various transactions both online and offline.

Buy Now, Pay Later vs. Credit cards: Pros and cons

Aspect

Buy Now, Pay Later (BNPL)

Credit Cards

Pros

Convenience

Offers quick checkout

Provides ongoing credit limit

No interest (usually)

Typically interest-free

May have interest charges

Budgeting control

Fixed instalment plans

Revolving credit line

Approval process

Often easy approval

May require good credit

Cons

Debt risk

Can lead to overspending

Potential for debt accumulation

Limited credit building

Usually does not improve credit

Can help build credit

Impulse purchases

Encourages impulse buying

May require more discipline

Protection

Limited consumer protection

Stronger consumer protections

Financial flexibility

Limited flexibility for large purchases

Flexible credit line

Use cases

Smaller, frequent purchases with predictable payments

Versatile for various expenses and emergencies


When deciding between Buy Now, Pay Later (BNPL) and credit cards, it is essential to consider your financial goals, spending habits, and credit situation. BNPL is convenient and often interest-free but can lead to impulse purchases and limited credit building. Credit cards provide more flexibility and rewards but come with the risk of accumulating debt and potential interest charges. Assess your needs and financial discipline to determine which option aligns best with your financial strategy.

Impact on your credit scores

Using BNPL services like the Bajaj Finserv Insta EMI Card may not directly impact your credit scores. Since BNPL providers may not conduct a comprehensive credit check, the transactions might not be reported to credit bureaus, which means they do not contribute to building or improving your credit history. However, responsible usage of a credit card, with timely EMI payments and prudent credit management, can significantly impact your credit score in a positive way. Building a good credit history through credit card usage can increase your chances of getting approved for future loans or financial products.

What should you do?

When choosing between BNPL and credit cards, consider your financial needs and spending habits.

Choose BNPL if:

  1. You prefer interest-free options for specific purchases
  2. You have limited or no credit history, and you want to start building credit responsibly
  3. You want to enjoy budget-friendly instalment plans for select transactions
  4. The BNPL service offers attractive deals and discounts at your preferred partner merchants

Choose credit card if:

  1. You need a flexible credit line that can be used for various purchases and transactions
  2. Building or improving your credit history is a priority, and you can manage your credit responsibly
  3. You value the convenience of a widely accepted payment method, both online and offline
  4. You want to take advantage of rewards, cashback, and other benefits that credit cards offer

In conclusion, both BNPL and credit cards have their unique advantages, catering to different financial preferences and needs. The Bajaj Finserv Insta EMI Card, with its Buy Now Pay Later feature, provides a convenient and interest-free way to manage specific purchases. On the other hand, credit cards offer greater financial flexibility and the potential to build credit when used responsibly. Ultimately, understanding the differences and assessing your financial requirements will help you make the right choice for your financial journey.

Disclaimer

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Frequently asked questions

How is BNPL different from a credit card?

BNPL allows consumers to make purchases and pay for them later in instalments, typically interest-free for a limited time. Unlike credit cards, which offer a revolving line of credit with interest charges on unpaid balances, BNPL transactions are treated as separate instalment plans. Additionally, BNPL providers often do not require a traditional credit check, making it more accessible to individuals without an established credit history.

Is BNPL like a credit card?

While BNPL and credit cards facilitate deferred payments, they operate differently. BNPL offers fixed instalment plans for specific purchases, while credit cards provide a revolving credit line for various transactions. BNPL does not require a credit check, whereas credit cards usually involve a credit assessment. Both options allow payment over time, but they vary in terms of flexibility, credit checks, and interest charges.

Are BNPL services interest-free, unlike credit cards?

Yes, BNPL services often come with interest-free periods, allowing customers to repay their purchases within a specific timeframe without incurring additional interest charges. In contrast, credit cards may involve interest on unpaid balances if the cardholder carries the debt beyond the grace period.

Is a credit card considered buy now, pay later?

Yes, a credit card allows you to make purchases and pay the bill later, which is a form of "buy now, pay later" arrangement. However, BNPL services offer specific plans with structured repayment options beyond the usual credit card billing cycle.

How does BNPL work, and how is it different from using a credit card?

BNPL lets you split purchases into instalments, often interest-free. It is distinct from credit cards, offering specialised instalment plans for certain items, usually without interest, and with set payment dates.

What are the benefits of BNPL over credit card?

BNPL can offer lower or no interest rates, fixed payment schedules, and accessibility to those without credit cards, while credit cards provide broader financial flexibility and rewards programs.

Does BNPL affect CIBIL Score?

Buy Now, Pay Later (BNPL) transactions typically do not directly impact your CIBIL score or credit report in India. BNPL services in India are usually not considered traditional credit, and they don't report your payment history to credit bureaus. However, if you miss payments or default on BNPL obligations, it could indirectly affect your CIBIL score if the provider reports the delinquent account to the credit bureau.

Is Buy Now Pay Later risky?

Buy Now, Pay Later (BNPL) can be risky if not used responsibly. While it offers convenience and interest-free options, it can lead to overspending and impulse purchases, potentially causing financial strain. Moreover, missed payments or late fees can accumulate quickly, increasing your overall cost. To use BNPL wisely, budget carefully, and ensure you can make the required payments on time. Always read the terms and conditions of the BNPL service to understand the fees and penalties involved, and consider how it fits into your overall financial strategy.

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