Both ‘buy now, pay later’ (BNPL) and credit cards allow consumers to make purchases and pay in instalments, so how do they differ?
BNPL represents a growing trend amongst consumers, allowing them to make online and in-store purchases and pay for them in instalments. Unlike credit cards, Buy now pay later (BNPL) plans are often interest free. As BNPL giant Zip explains, both services give shoppers a way to pay for what they want, then pay off purchases over time, but there are key differences between the two.
According to Zip, a significant difference is that most credit cards charge interest when there is an unpaid balance, whereas BNPL services, like Zip Pay, offer interest free transactions.
Additionally, when a consumer applies for a credit card, the approvals process is a lot more complex and requires a credit check, where the bank provider looks at the individual’s credit history. In contrast, applying for an account with Zip can be done online in minutes.
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Depending on the type of credit card, users can be charged high annual fees and ongoing interest rates, whereas many buy now pay later (BNPL) accounts, like Zip Pay, only charge minimal monthly account fees if there is an outstanding balance.
When a consumer applies for a credit card, they are issued a credit limit based on the bank provider’s assessment of the individual. As Zip explains, this can lead to consumers spending more than they can necessarily afford. Zip Pay offers up to $1,000 with flexible repayment options.
Zip says credit card issuers tend to be less transparent when it comes to repayment plans. Consumers need to work out for themselves how much to pay each week or fortnight to clear their credit card debt, to avoid paying interest or additional fees. In contrast to a BNPL account, if only the credit card minimum monthly amount is paid, it could take years to pay off the accrued debt.
A BNPL account with Zip, who also now offers business loans, can make it easier for consumers to budget and manage their finances. To learn more, contact Zip directly.
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