With a Pay-Later card, not only the user has a lot more convenience to pay back an amount on their terms, the biggest advantage vcredit card is that the effective charges are considerably lower because the charges are applied on a certain portion of the bill whereas in case of a credit card they are applied on the entire amount.
Pay Later cards trump credit cards with product customisation, ease of use, low-interest rates and transparency.
The emergence of Pay Later Cards in India reflects the way millennial consumers today want to buy and pay. Industry experts say consumers are often looking at convenience, flexibility and affordability.
Nitin Gupta, Founder and CEO of Uni Cards, says, “Pay Later cards trump credit cards with product customisation, ease of use, low-interest rates and transparency.”
Let’s consider two scenarios: Scenario 1 – A user does a Rs 30,000 transaction on a credit card. Now this Rs 30,000 will be due at the end of the month for the customer to pay back. If the customer gets delayed in paying this amount, then the user has to pay two charges (a) Late fee as per the slab of Rs 30,000 (b) penal interest charges (42 per cent APR + GST) applicable from the date of transaction on the entire Rs 30,000. If the user pays on time but does not pay the entire Rs 30,000, then whatever is paid less, the user pays penal interest charges on that amount applicable from the date of transaction.
Scenario 2 – A user does a Rs 30,000 transaction using a Pay Later card. Now the bill for the month is only Rs 10,000 for the cardholder. If he/she does not pay Rs 10,000 on time and gets late, then digital lending company levies two fees on the cardholder (a) Late fee as per the slab of Rs 10,000 (and not 30,000) (b) Carry forward fee which gives a user an extra month to pay back this bill. The carry-forward fee is applied only on the Rs 10,000 amount. This carry forward fee is a fixed fee which is usually between 3-5 per cent.
Effectively, Gupta explains, “with a Pay-Later card, not only the user has a lot more convenience to pay back an amount on their terms, the biggest advantage versus credit card is that the effective charges are considerably lower because the charges are applied on a certain portion of the bill whereas in case of a credit card they are applied on the entire amount.”
However, if you are still undecided about Pay Later, here is a quick guide that will help you understand the differentiation.
Here’s how Pay Later differs from a credit card:
Pay Later – Instant onboarding, not all players depend on the credit scores.
Credit card – Depends on the credit scores. Requires paperwork and could take a few days.
Pay Later – The interest-free credit period is for most up to 15 days, certain lenders offer up to 45 days and players like Uni, Slice, etc. offer 90 days of interest-free credit.
Credit card – Usually, 45 days, pay full or convert into EMIs (up to 36 months) for select payments.
Annual and joining fee
Pay Later – Nil
Credit card – Credit cards come with charges like joining fees, recurring annual fees etc, which can be higher for premium cards. Usually joining fee comes up to Rs 1,000 varies across different card issuers.
Pay Later – Discounts and offers on the partnered merchant platforms. BNPL players offer 24×7 customer support across platforms like Whatsapp, email and call.
Credit card – Reward points, Cashbacks or air miles on most purchases.
Late Payment fee
Pay Later – As per the slab of the bill amount
Credit card – Varies from card to card
Late Payment interest
Pay Later – The maximum interest of many fintech players is around 2.5 per cent a month which is 30 per cent per annum (non-revolving) in the case of non-payment.
Credit card – The revolving credit on a credit card is often 3 per cent to 3.5 per cent monthly which comes out to be 36-42 per cent annually.