The Tempting Simplicity of 'Pay Later'
Buy Now, Pay Later services have become a go-to payment option across India, allowing you to purchase items instantly and pay for them in interest-free instalments. The appeal is obvious: you can get all your festive shopping done—from gifts and new clothes
to electronics—without paying the full amount upfront. This instant gratification can feel like a financial superpower, especially when your wishlist is long and the deals are tempting. Unlike traditional credit, BNPL approvals are often instant, requiring minimal checks. This accessibility makes it popular among younger, tech-savvy shoppers and those new to credit. However, this ease of use is also its biggest risk, creating a psychological trap that encourages spending money you might not actually have.
The Hidden Costs That Catch You Off Guard
While many BNPL plans are advertised as “zero-interest,” this only applies if you pay on time. Missing a due date, even by a day, can trigger hefty late fees and penalties. These charges can range from flat fees of ₹100 to over ₹500, and some services add daily interest on top. On a small purchase, these fees can quickly make your item far more expensive than its original price. Furthermore, if you convert your outstanding balance into longer-term EMIs, you could face interest rates as high as 24-36% annually, often higher than traditional credit cards. These costs are frequently buried in the terms and conditions, which many users don't read, leading to unpleasant financial surprises after the festivities are over.
The Slippery Slope into Overspending
BNPL's core design encourages impulse buying. Because the payment is deferred, it doesn't feel like you're spending real money, which can lead you to buy more than you can truly afford. During the festive season, this is particularly dangerous. Juggling multiple BNPL plans across different apps—one for electronics, another for fashion, and a third for groceries—creates fragmented debt that is difficult to track. Before you know it, the total outstanding amount across all apps can add up to a significant portion of your monthly income. Lenders see this as a red flag, viewing multiple active BNPL accounts as a sign of credit-seeking behaviour, which can harm your financial standing.
Protecting Your Credit Score
A common misconception is that BNPL doesn't affect your credit score. In reality, most BNPL providers in India now report your payment history to credit bureaus like CIBIL. Every transaction is often recorded as a small personal loan. While making timely payments can actually help build a positive credit history, especially for first-time borrowers, any missed or delayed payments will have a negative impact. Even a single default can lower your score, making it harder to get approved for larger loans like a home or car loan in the future. Having too much outstanding BNPL debt can also increase your credit utilisation ratio, another factor that can pull your score down.
How to Set Your Festive Cash Limit
The key to using BNPL responsibly is to treat it like cash. Before you start your festive shopping, create a detailed budget outlining all your expected expenses—gifts, travel, food, and decorations. From this budget, determine the absolute maximum amount you can comfortably repay from your next month's income without straining your finances or dipping into emergency savings. This is your cash limit. Rule of thumb: if you couldn't afford to buy it with cash today, don't buy it with BNPL. Stick to this limit ruthlessly. A good practice is to use only one BNPL app to avoid fragmented debt and track your spending easily. And consider setting up automatic payments to ensure you never miss a due date.
