Why do people use pay later services over credit cards?

Pay later services like LazyPay, Paytm Postpaid etc have

  1. Very low credit limit, it’s almost like a joke
  2. Repayment in 15 days
  3. Usable only on select domestic sites they partner with and not usable offline, not usable internationally

Credit card have:

  1. High credit limit
  2. Repayment in 50 days
  3. Usable online, offline, internationally, everywhere

So why do people use pay later services when credit cards exist?

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There are few advantages-

  1. Ease of transaction
  2. Unicard, etc offer free credit for 3 months
  3. Helps in reducing overall credit utilisation ratio
  4. Extra credit cushion for emergency spends
  5. Discount & offers

And majority are those who couldn’t get credit card from banks.

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  1. If by ease you mean having to enter credit card number, it doesn’t make sense.
  2. Unicard is a credit card, not a pay later service.
  3. and 4 are for poor people.
  4. Paytm postpaid charges convenience fees as opposed to credit cards that give you cashback.

It’s for people who couldn’t get credit cards, that makes sense

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  1. I use flipkart pay later… its really convenient. Try it.
  2. Unicard is a BNPL product… just card based.

Btw, I’m not advocating BNPL over credit cards, just highlighting their advantages.

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While this BNPL services are on the rise, a lot of people do not know it’s impact on cibil. All these services (flipkart pay later, Amazon pay later, slice card, uni card, Paytm post paid and lazypay) show up as consumer/personal loans which make your credit history unattractive… more loans on cibil makes it harder to get a real loan with your preferred interest. You may end up needing to pay more or sometimes not even approved.

Not to mention that a few of those services also report default to Cibil. I’ve seen such a case where IDFC bank reported default to Cibil of my friend even though he had not missed any… he came to know about this only when he applied for car loan which was rejected due to the entry of default

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