As More People Opt For 'Buy Now, Pay Later' Schemes, Are Credit Cards On The Way Out?

A buy now, pay later (BNPL) arrangement is essentially a point of sale instalment loan

Buy now, pay later (BNPL) is fast emerging as the popular and preferred payment option among Indians, especially after the onset of the novel coronavirus pandemic. Experts say that BNPL, which currently holds a 3 per cent share, is expected to be the fastest-growing online payment method by 2024 when it’s set to achieve a 9 per cent share in the Indian market. While the benefits, compared to the traditional credit cards, are many, the one that attracts people the most towards BNPL is no interest charge.

What’s BNPL?

A buy now, pay later (BNPL) arrangement is essentially a point of sale instalment loan that a merchant offers to its customers at the time of purchase, while also letting him or her make the payment on a future date. A typical BNPL arrangement involves a customer making an upfront payment and then paying the remaining amount in a predetermined number of instalments. As against credit cards, which at times cost you a lot of money in interest, BNPL, usually, don’t charge interest and are comparatively easily approved. Online credit cards, the BNPL option is available to everyone as you click on the checkout option of an e-commerce platform such as Amazon, Myntra and Nykaa.

Are credit cards on the way out?

With the growing number of people opting for BNPL schemes, many speculate that the traditional credit cards might be on their way out. But let’s have a closer look at if the BNPL can really replace credit cards. While BNPL appears to be a great option, a credit card does everything, including the payment for utility bills and other expenses such as on-store shopping etc. As far as interest is concerned, you can avoid paying anything extra by paying off your debt on time. But among other charges that a credit card company may levy include an annual fee, balance transfer fee, cash advance fee, foreign transaction fee as well as late payment fee.

While the point of sale instalment loans is a great option to make purchases and pay later in instalments, there are a lot of other expenses that can only be taken care of using a credit card. For example, you do need a credit card to book a flight ticket or rent a car. And while BNPL is convenient because you get approval almost instantly, it doesn’t seem to be in a position to replace credit cards entirely.

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