ARTICLES

The ‘Buy Now Pay Later’ or the BNPL scheme has become quite a popular mode of transaction in recent times as more and more platforms have started offering this feature. You need to understand the BNPL system in detail, a relatively newer concept before you opt for it. So, here are the important aspects of the BNPL system, simplified.

What is BNPL?

As the name suggests, Buy Now Pay Later is a feature which allows you to transact on credit. You can make credit payments and then clear your dues at a later date.

BNPL vs Credit cards

While credit cards also allow credit facility, it is different from the BNPL system. For starters, there is no card issued under the BNPL system. You can just opt for the feature at the time of payment and the amount is added to your outstanding dues. Other differences include –

• No credit history or eligibility parameters are needed to opt for BNPL.

• It is relatively cost-effective.

• The interest charges are low as compared to personal loans and credit cards.

• The BNPL feature is usually available on digital transactions only.

• You don’t get additional rewards or other features available on credit cards.

How does BNPL work?

There are different BNPL platforms available. You can register with one or more platforms to opt for the BNPL feature. Thereafter, when you transact online, you are given the option of BNPL at the time of making payments. If you select the option, the transaction amount is added to the list of other outstanding dues.

There is a specific billing cycle when the bill is generated containing the outstanding dues. You have to pay the bill within a specified timeline to avoid interest charges otherwise interest would be charged on the dues.

Things to know

• There is a credit limit up to which you can make credit transactions and is quite low.

• BNPL is a type of credit facility for a short-term period.

• You can clear your dues in a lump sum or in instalments.

Pros & cons 

Pros:                                                                                                                        

• The credit facility, especially in a financial crunch.

• Easier checkout on digital transactions.

• You can keep a tab on your spending.

• Easier accessibility through online sign-up.

• Rewards for registering with the BNPL platform.

Cons:

• Interest is applicable on non-payment or late payment.

• Can cause overspending.

• Impact on credit score on late payment or default on clearing the dues.

• Lump-sum payment might put a dent in your finances.

The bottom line

The BNPL system is a convenient option for transacting provided you know the possible pitfalls. So, understand what the concept is all about, and how it works and use it if it aligns with your transactional preferences.