Do you know what happens if you do not pay your credit card bills on time? The bank or a financial institution that has issued you a card can impose a late payment fee along with an exorbitant interest rate. In the credit category, there is another option that is gaining momentum in India, which is the Buy Now Pay later card. Over the past few years, it has grown leads and is bound to become a prominent form of financing in India. COVID-19 has further accelerated its demand, and now it has emerged as a more convenient payment method by offering no-cost EMIs. It allows you to simply divide your monthly bill into three equal parts to be paid over the next three months at absolutely no extra cost. Uni cards are one such card that gives you this benefit. If you are new to the line of credit or your credit card application got rejected, you might be interested in applying for Uni cards, but before you understand its working model and how it can benefit you.
Buy Now, Pay Later: How does this model work?
We as Indians have been taking advantage of something similar model for ages. BNPL is somewhat similar to the Khaata system of payments, wherein customers would pay the entire bill in one go, typically by the end of the month, instead of paying every time they make a purchase. While this system is still in practice in small towns, companies like Uni cards have added a fresh spin to this by coming out with a credit card. From food to groceries, people can buy from hyperlocal merchants, etc., and just pay the collated amount.
Credit cards or BNPL: What is the difference?
No doubt that credit card has made our life easier by letting us buy things even when we do not have money in our bank account, but sometimes our credit card application gets rejected, and during those times, BNPL cards seem like a good option to go for. With Uni cards, you can get interest-free credit provided you pay back the amount by the due date. We have listed down the differences between BNPL and credit cards that can help you in making your choice.
- Application Process: One can apply for Uni cards or create a buy now pay later account almost instantly without much hassle as compared to a credit card application where it requires your income proof, company name, etc. If you do not have an income to show or don’t have a credit history to back up, proceed with Uni cards apply. In that sense, creating a BNPL account is much easier than a credit card as the former doesn’t involve a credit check, no debts discussion, and no income assessment by the lender.
- Almost instant access to funds: Just like you can instantly go ahead with Uni Cards apply, you also get the advantage of having access to instant funds. With a credit card, you have to wait for a considerable period to be able to use it for your needs or wants. Having said that, the same benefit can push you towards creating more debt or making you depend on more credit.
- Repayment schedule: Uni cards or Buy Now pay later cards allows you to spread the cost of your purchase too without paying any interest. Credit cards too offer interest-free periods on purchases which is around the same time as the BNPL repayment window.
- Consequences: Irrespective of the credit option you choose, there are always some consequences if you fail to make a payment on time. In the case of BNPL, you may be banned from making more purchases along with paying the fees. Also, if you miss your payments regularly, the same may be reported to the credit reporting agencies, which will ultimately affect your credit score. The consequences with BNPL is some what similar to credit cards, and also, though in credit card, you have to pay the interest with late payment fees as well.
- Late payment interest: With the pay later option, the maximum interest of many companies is around 5 percent a month which comes around to 30 percent per annum (non-revolving) in the case of non-payment. And with a credit card, it is way too high. The revolving credit on a credit card is oftentimes 3-3.5%/monthly, which easily comes to around 36-42% annually.
What must you remember with Uni cards?
- As mentioned above, the Uni card allows you to split your monthly bills into 3 interest-free instalments that could easily lead you into a debt trap.
- The card doesn’t charge interest within the 1/3rd payment window, but it charges a late fee. If you fail to meet your payment deadlines, you will end up paying exorbitant charges. To give you an illustration, an unbilled amount of Rs. 40,000 attracts a late payment charge of Rs. 3000
Who should go for this card?
Uni card is pretty reasonable for those who are new to credit customers and may not be eligible for traditional credit cards due to having low salaries or unstable income. With Uni cards, one has to remember that it can easily make you overspend. Limit your spending and do not extend repayment beyond the free credit period. You can even use Uni cards to build your credit score by timely repaying your due payment.
On the face of it, having a pay later or Uni cards looks convenient. For example, with credit cards, your interest starts to clock from the first billing cycle’s payment date, but Uni cards allow you to postpone your payment for the next three months at no additional charges. But there are caveats to this facility. Before you go ahead with the Uni Cards apply, remember that credit cards are accepted across the world, whereas Uni cards or BNPL service is still expanding though rapidly. Due to this, BNPL doesn’t offer that many perks as compared to credit cards. If you are someone who chooses credit cards based on perks such as airport lounge access and free tickets, then you are in for disappointment with BNPL cards. Hence, relying wholly on BNPL cards doesn’t make sense to make purchases, and having one credit card is important now.