The festival of lights is around the corner and shopping and gifting will be the order of the day ahead of the festivities early next week. Both physical as well as online stores are coming up with a slew of offers across a wide range of products in the run up to Diwali.
But before you go out and loosen that wallet string, do take a minute to look at the fine print on such offers, especially the much in-vogue Buy Now Pay Later (BNPL) schemes. These schemes allow you to buy the product by just paying a processing fee or one-time upfront charge.
Buy Now Pay Later
A BNPL scheme allows you to buy the product for a credit-free period, which usually ranges from 15-45 days. If you pay the full price during this credit-free period, the only extra charge you will be paying is the processing fee or one-time charges which you will have to pay upfront while buying the product. The processing fee varies from 3-5 per cent.
While availing a BNPL offer at various platforms, you will have to submit your Permanent Account Number (PAN), Aadhaar, as well as link the platform with your bank account. These documents are required to establish your credit limit, as well as take note of your salary, age and CIBIL score.
Points To Remember While Availing BNPL
It is advisable to pay the full amount pending during the credit-free period, as you won’t have to pay any late fees. Besides, you will also have to pay interest if you choose to pay through equated monthly instalments (EMIs).
When you opt for an EMI payment route after the initial interest-free period, the platform usually charge anything between 10 and 30 per cent on the principal, which is based on your CIBIL score and the number of EMI you choose.
When you opt for a BNPL scheme you will be missing out on the discount offered by the merchants, which can be immense during the festive season. Instead, this discount goes to the BNPL platform.
Also remember that you can be charged a hefty late fee if you don’t pay the full amount within the credit-free period, or if your account at the BNPL platform doesn’t hold sufficient amount to pay for your BNPL scheme.
Besides, Goods and Services Tax (GST) is also applicable on these charges. Some platforms even charge a penalty fee on a per-day basis. The late fees on the BNPL platform varies on the basis of the price of your product. For an amount above Rs 5,000, a BNPL platform may charge around Rs 300-600. Besides, you will also have to pay 18 per cent GST on these charges.
If you miss two-three instalments, the consequences will reflect badly on your CIBIL score, too.
Says Nalin Agrawal, CEO and co-founder of Snapmint, a BNPL platform: “Every institution reports late fee payments to the credit bureau, which affects the consumer’s credit score. Additionally, most non-banking financial companies (NBFCs) believe in levying hefty charges, too. At Snapmint, however, the customer is not punished with late fee charges.”
Bounce Charges
When the consumer is not able to the full amount during the interest-free period, they are charged a late fee penalty and interest if they choose an EMI route to pay back the remaining amount.
“The initial credit-free period is usually 14 days, after which a penalty of 3 per cent (varies at different platforms) can be imposed every month from the date of the transaction,” says Rachit Chawla, CEO Finway FSC and a Sebi-registered investment and financial advisor.
