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In recent years, several Buy Now, Pay Later (BNPL) providers have emerged in Singapore. As the name implies, BNPL services allow consumers to purchase products or services immediately and defer payment to a later date, typically through fixed, regular instalments.
If you think BNPL sounds similar to an existing financial product, you’re not alone. When I first heard about BNPL, I immediately thought of credit card instalment plans, which many of us are already familiar with. Similar to BNPL, credit card instalment plans let us pay for purchases in monthly instalments over a selected period.
For example, Standard Chartered EasyPay allows us to convert retail transactions into interest-free instalments with flexible tenures ranging from 3 to 12 months. If we make a retail purchase of S$6,000 for a luxury watch, we can either pay it off in full when we receive our credit card statement or choose to split it into six smaller payments over the next six months.
This leads us to the next question: what are the differences between using BNPL and a credit card instalment plan?
Understanding The Basics
Credit Card Instalment Plans: To utilise a credit card instalment plan, you must first have a credit card that offers this service. For instance, you will need to spend on your Standard Chartered credit card in order to choose flexible instalments with Standard Chartered EasyPay. This feature is particularly useful for managing larger purchases, such as buying household appliances or even a luxury item, where you get to earn credit card rewards like cashback, miles, or other promotions, and split the cost into smaller, manageable amounts.
BNPL Services: BNPL services generally have lower entry barriers, making them accessible to a broader range of people, including students and retirees, without requiring a minimum income or credit card. This flexibility can be attractive for smaller purchases or for those who prefer not to use a credit card. However, do note that BNPL are not regulated in Singapore.
Optimising Your Payment Choices
In our opinion, another key difference between BNPL and credit card instalment plans is the size of the purchases they typically support.
For Smaller Purchases: BNPL providers usually have very low minimum spending requirements (e.g., less than S$10), although individual merchants may set their own minimum purchase values before allowing the use of BNPL services.
According to the BNPL Code of Conduct, there is a cap of S$2,000 on outstanding payments that customers can have with each BNPL provider unless additional creditworthiness assessments are conducted.
For Larger Purchases: credit card instalment plans usually require a higher minimum amount allowing it to be used for more substantial purchases. For instance, Standard Chartered EasyPay has a minimum threshold of S$150 to convert payments into monthly instalments, making it an ideal option for managing bigger spends while also maximising your credit card rewards and benefits.
When it comes to maximum transaction limits, credit card instalment plans often offer higher limits tied to the credit limit of your card, which can be up to four times your monthly income.
Availability & Flexibility
One thing to note is that BNPL services are not universally available. To use a BNPL service, the retailer from whom you are purchasing must have a partnership with a BNPL provider.
In contrast, credit card instalment plans are more widely accessible. As long as a retailer accepts credit card payments, your spending will be recorded on your credit card, and you can then convert your eligible transactions into instalments.
Our research indicates that most BNPL providers offer shorter payment tenures, typically ranging from a few weeks to around three months. In comparison, credit card instalment plans, such as Standard Chartered EasyPay, offer longer tenures from 3 to 12 months.
Another key difference is when you can opt for the service. For BNPL services, you must opt in at the checkout counter before completing your purchase. Conversely, with credit card instalment plans, you can make your purchase first, then choose to convert your payments into instalments later. This allows more time to decide whether an instalment plan is necessary after the purchase has been made.
Fees
For credit cards, there is usually a one-time processing fee that we need to pay when converting our transactions into monthly instalments. Similarly for BNPL, some providers may claim they don’t charge any processing fee, but it doesn’t apply to all BNPL providers. Make sure you check the terms accordingly!
Regardless of whether you use credit card instalment plans or BNPL services, it’s important to always remember to have sufficient savings before making your purchases so that you can pay your instalment payment promptly to avoid any late/interest charges. Otherwise, you will end up paying more than you need.
Read Also: Why Do Some People Use A Credit Card Instalment Plan Even When They Can Pay In Full?
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