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Difference between credit card and BNPL

 

In a world where technology and lifestyle are developing rapidly, our purchasing habits have had to follow. From the latest electronics & gadgets to fashion must-haves & home items, the pace of change is relentless. Online shopping and tech solutions have made it easier for us to get what we need with just a single click - we can spend hours scrolling through the endless options!

 

The credit card vs. BNPL is one of the hugest undergoing fintech competitions. The ‘buy now pay later’ (BNPL) shopping style has been on the rise, especially during the pandemic of 2020, and has continued since then. With a market worth of $248.1 billion in 2023, this method has spread its wings across the entire market, and of course in the UAE, with BNPL players such as cashew.

 

What does BNPL stand for?

 

People often fantasize about having a magical genie that aids them in their shopping sprees without swiping their debit or credit cards.  Well, the 'buy now pay later' trend is the modern-day version of that legendary genie! The hassle-free registration process and the user-friendly experience make BNPL a preferred choice over other payment methods, like credit cards.


How does BNPL work?


The Buy Now Pay Later procedure relies on point-of-sale (POS) financing, enabling shoppers to buy products in stores or online and pay for them in several installments without being charged interest. 

 

 

The BNPL market has seen tremendous growth over the past several years, starting at $87.2 billion in 2020 and reaching an estimated $179.5 billion in 2022. But it doesn’t just stop there! This trend is expected to continue, with the BNPL market predicted to triple by 2025 to an epic $531.53 billion. If that wasn't impressive enough, the BNPL market is expected to be worth an astonishing $3.27 trillion by 2030.

 

According to statistics,

  • Three-fifths of customers have used BNPL in the past.
  • As of April 2021, 46% of people have an active BNPL agreement.



 

Are you considering a BNPL plan? Make sure you know that…


Not all BNPL plans are the same. Every company has its rules and regulations, but they all generally work the same:
 

  • You place an order with a participating retailer and choose the shop now pay later option during checkout.
  • If you're approved (which usually happens instantly), you put down a percentage of the total cost.
  • You then pay off the balance in a series of interest-free installments; at no additional cost.
  • The installments will be automatically deducted from your debit card or credit card.

 

Why is BNPL so successful?


Buy now pay later (BNPL) services have become trendy due to the absence of interest, unlike what you get with a credit card. Also, short-term financing companies like cashew support you in making responsible financial purchases so you don't have to worry about affecting your credit score.

 

Is BNPL better than credit cards?


Have we already grown accustomed to paying with our credit cards at a later date? Sure have! But to answer the question, we need to figure out how credit cards and buy now pay later (BNPL) options vary.


The key difference is that you can use your credit card almost anywhere and with any store, while BNPL can only be utilized with affiliated vendors they've partnered with.
 

How do credit cards work?


Credit cards enable you to take out a loan from the issuer to purchase items and services. Once you've purchased something, you have the option to pay the amount back all at once or in monthly portions. You'll be charged interest if you don't pay off the balance. Additionally, you can spend up to a certain limit with the card.


So, what other contrasts are there between these two payment methods?

BNPL vs. Credit Cards – How is BNPL different from credit cards?


If you're choosing between a buy now, pay later option and a credit card, consider this list of differences between the two. Since the BNPL approach comes with plenty of perks, credit cards also offer some advantages that make them an attractive option as well.


Of course, there are downsides for both and the following list can help you make the rightest decision for your wallet.

 

Pros and cons of BNPL and Credit card

 

All in all…


Purchase the items you want now and pay later with payment plans. BNPL is a great way to purchase items online or in-store with minimal hassle and often without interest fees. These installment loans at the checkout can be the perfect solution for those who face any difficulties getting the green light for a traditional credit card due to insufficient credit or a low score.


Paying BNPL loans on a regular basis is essential to protecting your credit score; having a credit card is also beneficial in certain circumstances. Think about when you need to book a flight ticket or reserve a hotel room - having a credit card in hand will definitely help!

The decision is yours. Choose wisely!


Millennials and Gen-Zs are more likely to go for the BNPL to adhere to the fast-paced lifestyle and futuristic ambitions, yet limited cash resources.


According to Retail Dive’s survey in Oct 2022, Gen Z is the most likely to take advantage of BNPL services during the holidays, with nearly half of them (48%) expressing their intention to do so. Millennials follow this at 47%, Gen X at 40%, and a mere 14% baby boomers.

 


 

The ‘buy now, pay later’ plans might be the right choice for you if you have learned about the art of correctly managing your budget. Download the cashew app for IOS and Android, and start splitting your payments with cashew.