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What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is i

What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?

scarface_74 1y ago
Fixed payment schedule and no interest being charged.
- SoftTalker 1y ago
  For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.
  - Tadpole9181 1y ago
    Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?
    - scarface_74 1y ago
      That’s not how BNPL works in its modern form with the third party companies. You pay late fees if you pay late. If you have a 3 month plan, they divide the payment into three equal installments and you pay it off. The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report. They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.
    - drexlspivey 1y ago
      Ah yes, the big scam of offering zero interest unsecured loans to anyone without even running a credit check. These companies are bound to have big losses when things go south because they literally offer you free money.
      - NewJazz 1y ago
        They are already having big losses.
    - barchar 1y ago
      Beats the pants off a payday loan.
Tadpole9181 1y ago
BNPL is 0% interest over N months. A credit card is 20% APY over the total balance over minimum payment. And it's offered by my CC providers. For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle). It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe it's because I do pay it, and if I didn't there would be 200% APY or something.
- eptcyka 1y ago
  The seller benefits from the increased demand, the financier sells this as a service to the seller.
- dzhiurgis 1y ago
  I bought tons of solar panels with 24 month 0% interest CC for my DIY installation. Kinda makes entire system free. I wish BNPL were offering longer payment periods, few months is not worth the risk at all.
  - wildzzz 1y ago
    Subprime borrowers use BNPL a lot and often don't pay it all back. Extending the terms would likely mean Klarna and Affirm will make back less money before the loan defaults.
- crab_galaxy 1y ago
  Yeah, I’m not sure if BNPL loans have changed in the last decade at all but the financiers make money on the people who don’t pay the balance by the end of the term. I’ve financed a couple expensive electronics when it made more sense in my younger days and the terms were such that if you don’t pay it off by the end of the term, you owed ~24% of the total bill in interest.
- jabroni_salad 1y ago
  The merchant pays a fee for it, and they do it to get a sale that they otherwise would have missed. If you decide to save $25/mo for a $100 product, that is 4 months for you to change your mind, have an emergency suck up that money, or score a lower price by waiting for a sale. But for some segment of the population, they will close on a pay-in-4 right now instead of waiting, and that is guaranteed money.
paxys 1y ago
- No application process. You are at a store's checkout page or sales kiosk and can sign up in a couple of clicks. - No credit checks. - Longer payment period - usually 2-3 months with no interest.
9rx 1y ago
A credit card is for gaining access to the electronic payment monopoly's network[1]. BNPL is explicitly a loan. Yes, a credit card transaction may effectively turn into BNPL if you fail to complete your end of the transaction in a timely manner, but that is a hindsight outcome, not the reason for choosing the method in the first place. [1] Nowadays you can often also use the network with other methods, like a debit card, but those alternatives still aren't universally accepted like credit cards are.

What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?

scarface_74 1y ago

Fixed payment schedule and no interest being charged.

SoftTalker 1y ago
For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.
- Tadpole9181 1y ago
  Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?
  - scarface_74 1y ago
    That’s not how BNPL works in its modern form with the third party companies. You pay late fees if you pay late. If you have a 3 month plan, they divide the payment into three equal installments and you pay it off. The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report. They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.
  - drexlspivey 1y ago
    Ah yes, the big scam of offering zero interest unsecured loans to anyone without even running a credit check. These companies are bound to have big losses when things go south because they literally offer you free money.
    - NewJazz 1y ago
      They are already having big losses.
  - barchar 1y ago
    Beats the pants off a payday loan.

Tadpole9181 1y ago

BNPL is 0% interest over N months. A credit card is 20% APY over the total balance over minimum payment. And it's offered by my CC providers. For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle). It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe it's because I do pay it, and if I didn't there would be 200% APY or something.

eptcyka 1y ago
The seller benefits from the increased demand, the financier sells this as a service to the seller.
dzhiurgis 1y ago
I bought tons of solar panels with 24 month 0% interest CC for my DIY installation. Kinda makes entire system free. I wish BNPL were offering longer payment periods, few months is not worth the risk at all.
- wildzzz 1y ago
  Subprime borrowers use BNPL a lot and often don't pay it all back. Extending the terms would likely mean Klarna and Affirm will make back less money before the loan defaults.
crab_galaxy 1y ago
Yeah, I’m not sure if BNPL loans have changed in the last decade at all but the financiers make money on the people who don’t pay the balance by the end of the term. I’ve financed a couple expensive electronics when it made more sense in my younger days and the terms were such that if you don’t pay it off by the end of the term, you owed ~24% of the total bill in interest.
jabroni_salad 1y ago
The merchant pays a fee for it, and they do it to get a sale that they otherwise would have missed. If you decide to save $25/mo for a $100 product, that is 4 months for you to change your mind, have an emergency suck up that money, or score a lower price by waiting for a sale. But for some segment of the population, they will close on a pay-in-4 right now instead of waiting, and that is guaranteed money.

paxys 1y ago

- No application process. You are at a store's checkout page or sales kiosk and can sign up in a couple of clicks. - No credit checks. - Longer payment period - usually 2-3 months with no interest.

9rx 1y ago

A credit card is for gaining access to the electronic payment monopoly's network[1]. BNPL is explicitly a loan. Yes, a credit card transaction may effectively turn into BNPL if you fail to complete your end of the transaction in a timely manner, but that is a hindsight outcome, not the reason for choosing the method in the first place. [1] Nowadays you can often also use the network with other methods, like a debit card, but those alternatives still aren't universally accepted like credit cards are.