Credit Cards or BNPL: Which short-term financing option is right for you? | Mint

Short-term finance options have increased in popularity in the fast-paced world of today. Credit cards and Buy Now, Pay Later (BNPL) services are among the most popular options. Let’s examine the main distinctions between these two choices so that you may make well-informed decisions regarding your financial requirements.

What are credit cards?

Financial companies issue credit cards, which allow consumers to pay for purchases up to some limit. With time, the cardholders can clear the amount with interest in most cases on the residual balance. Credit cards have several advantages apart from being convenient, such as offering travel insurance, purchase protection, and rewards programs.

Benefits of credit cards

• Widespread acceptance: Credit cards are very adaptable because they are accepted by the majority of retailers in the world.
• Creates credit history: Your credit score can be established and raised with responsible use.
• Rewards & perks: Several credit cards are offered with rewards that include travel miles, points, cash back, and offers to exclusive deals.

Drawbacks of credit cards

• High interest rates: In case, if the balance is not paid off straight away, carrying on the balance might incur big time interest charges.
• Annual fees: Some credit cards have annual fees if not used wisely that would offset the benefits.
• Credit reports: Based on your credit worthiness, approval often requires conducting a credit report.

What is BNPL?

It is known as Buy Now, Pay Later or BNPL and gives the customer the facility of spreading the cost over a specific period of time; often in instalments, while working like a mini-loan to facilitate the process of making a weekly or monthly payment in place of a conventional credit card.

BNPL vs. credit card

Your choice depends on your needs and spending habits. Consider these guidelines:

In conclusion, both credit cards and BNPL services have advantages and disadvantages. Credit cards have plenty of advantages and flexibility to be used but improper usage can lead to high-interest debt. BNPL services are attractive to make small interest-free purchases. Ultimately, it’s up to your financial status, spending patterns, and the type of purchase you make that determines which one you’ll need.

(Note: Using a credit card carries its own set of risks)