There’s a lot of conversation around finding the perfect stream to borrow money. And with applications coming into the picture, users have more sources to get exactly what they want, every time they need something.
Sadly, needs are unlimited, and if there’s an easy way to finance it, they end up buying things they don’t need with the money they don’t have, only to regret it. But of the two evils, let’s figure out which one’s worse.
This article explains the pros and cons of credit cards and buy now pay later service (BNPL), so you can make better informed decisions about money, capital, and finance.
- Timeframe and deadlines
- Processing fee and interest rates
- Convenience and conveyance
- Overspending and debt trap
- Precaution and caution
- Punctuality and flexibility
- Credit card or BNPL
Let’s delve right in:
Timeframe and deadlines:
Remember the age-old Khaata system that was widely prevalent in India? Where the sum borrowed was returned in a single repayment. Well, that’s exactly what BNPL is in a new avatar.
The app lets users select a date themselves where they can repay at one shot or avail easy instalments.
Whereas, credit cards have a strict 45 day period for repayment, post which, heavy interest rates apply. So, users that only pay the required minimum, almost never pay their principal back.
Processing fee and interest rates
Apps like ZeroPay, as the name suggests, charges users zero fees. But nothing comes for free, so if you do set a date and miss it, that’s on you to pay 24% Annual Percentage Rate (APR).
They’re flexible enough to offer up to six months, but you must select that time period and stick by it. With credit cards, everything’s already decided for you.
If you withdraw cash from an ATM, you must pay it back immediately. If you shop and swipe, you have a month and fortnight to repay, miss that and pay 40-42% APR.
Convenience and conveyance
Imagine you’re shopping online and you found something that really caught your eye. You check your bank balance and realise that’s a dream that has no way of coming true.
But there’s always credit, so you check the EMI. If it seems fair, you fill in all the credit card information and buy it. Guess what, the bank owns it. You can use the product, but if you don’t pay the bank back, it’ll vanish soon.
With BNPL, all it takes is a few taps. And whatever you buy is yours. You have ample time, an interest free period, and you can claim full ownership.
Overspending and debt trap
Now, let’s say you make ₹15,000 each month. Credit cards won’t approach you. You see an item worth ₹60,000 and believe you’ll cover it up in six months, four if you spend nothing.
Unfortunately, life takes a sharp turn and you have to take more loans to pay back the money you owe, with BNPL 24% of late payment fees. Do you notice how you’re digging a grave for your future?
With credit cards, you’d have to pay ₹60,000 plus 42% interest, and if you don’t, you lose the CIBIL score you spent a life building.
Precaution and caution
Always remember that people with money only lend to make more money. So, you’re not really borrowing from a third party. You’re borrowing from your future self.
And how much would you really want to tax that poor creature? Unlike a bad hangover that lasts a day, you’ll be stuck with a debt over your head that feels like it’ll never end.
So, all you have to do is borrow using your head. Set a timeline and figure out a way to pay it back on time. Hustle enough to never borrow again.
Punctuality and flexibility
There’s a simple way to keep a track of your finances, write it down! Remember all the loans you took and tell yourself that you’ll throw it back at the lender with an attitude.
Alright, let’s not get too savage. Remember, the more trust you earn by paying regularly, the more money you can borrow.
Using the flexibility of BNPL that allows you to invest in capital or anything that brings in money regularly. You can create wealth just like the rich do.
Credit card or BNPL
Begin the drumroll, let’s revise. Remember how India itself has a debt trap amounting to ₹65,00,000 crore. That seriously affects our rate of our country’s development.
Every time we think this is the financial period where we can breathe, a new situation comes in to drain the country off it’s money. Learn from these mistakes, don’t put yourself through the same situation to empathise.
While credit cards are meant to trap defaulters and BNPL is a friend you can borrow from as long as they trust you.
Pay your loans back and you get to borrow more than you need. Invest that money well and let the money pay itself back while working to make you some more. It takes zero effort with ZeroPay.