Credit Card Eligibility Criteria Is Driving Indian Consumers Towards BNPL Services. Find Out Why

Traditionally, Credit Cards have been an essential financial instrument in the hands of Indian Consumers, driving up spending by enhancing the purchasing power of the individual. The instantly available credit line has been beneficial in more than one way, but over the years, this system has shown its weaknesses, and the market has been craving for alternatives for quite some time.

This is where digital cards based on the BNPL (Buy Now Pay Later) scheme have come in. With the advent of these cards, people now have an alternative, and many are moving to this new system of instant credit. Let us understand in detail.

What are the limitations of a Credit Card?

Credit Cards have been around for a while now, and in terms of their usability and features, they have evolved very little in the last few years. They have the same old eligibility system that was there before the smartphone revolution. The only difference now is that the process has been shifted online, but except this, credit cards remain as exclusive as ever.

Being exclusive means that there is a set minimum credit score that is required for you to avail a credit card. If you do end up being eligible for a credit card despite a lower score, your credit limit will be very low, and you will have significantly less credit limit. A lot of users who have improved their financial standing are unable to get a credit card due to their past records being marred.

Additionally, credit cards come with a lot of hidden charges and steep annual fees. Note that these charges are not universally high and depend on the variant of credit card you have. Credit cards offer certain rewards and offers, and these determine your charges. So, more rewards mean more charges to be paid to the bank or the financial institution, regardless of how you actually use them.

Finally, the interest rates charged by credit card companies can be on the higher side if you compare them to the alternatives. If used unwisely, credit cards can end up creating a lot of debt for you, on which the higher interest would be an added burden.

So despite being extremely useful for a great number of people, credit cards still come with certain caveats that deny them universality. They are not for everyone.

Enter the Alternatives

In the smartphone era, it is only fitting that an app would provide the solution to the exclusivity of credit cards. Companies like LazyPay are offering their own cards, digital and physical, that allow instant credit up to Rs. 5 Lacs. These cards are based on the Buy Now Pay Later (BNPL) scheme, where you purchase an item, and the card-issuing company pays for it on your behalf, just like a credit card, but you are not required to pay any interest on the money later. You can pay back the amount in a lump sum in the stipulated time period.

Some benefits of these digital cards, which are prompting people to make the transition from credit cards to BNPL services, are as follows:

• EASY APPLICATION PROCESS: The application process is akin to signing up on any other app on your phone, with just your basic details and identification (for KYC) required in the beginning. There is no credit check.
• GOOD CREDIT LIMITS: You are given a basic limit like Rs. 2000 in the beginning, and this increases over time as you use the card more. The highest amount you can avail with these services goes up to Rs. 5 Lacs (in the case of LazyPay’s Lazy Card). Having this purchasing power interest free is a boon, and this realization is not lost on many.
• HIGH ACCEPTANCE: Companies like LazyPay are accepted by all major businesses and stores across India, and you will never have any inconvenience regarding payment acceptance.
• HELPFUL IN CREDIT BUILDING: Timely repayment of the borrowed amount can improve your credit score over time. Since there is no interest, you can use the card more freely and hence the improvement of credit score is better in the case of digital cards like Lazy Card.
• REWARDS: Much like credit cards, you are rewarded with cashback, but the main difference is that everyone gets the same rewards; there is no reward structure depending on your credit limit.

 

CONCLUSION

With the rise of BNPL services, consumers are starting to switch to digital cards like Lazy Card, which offer the same features plus some more. There is no credit check, thus widening the scope of eligibility. It is the modern solution to the limitations of a credit card and the next evolution.

 

 

 

(Above mentioned article is consumer connect initiative, This article is a sponsored publication and does not have journalistic/editorial involvement of IDPL)