Differences between debit, credit and “pay later” cards

Adhil Shetty, CEO of BankBazar.com, says, “While debit cards let you access your existing funds in a savings bank account, credit cards let you access credit. Line of credit cards or “pay later” cards are the ones that let you make purchases and then split the bill into three or more installments.”

For example, “pay later” cards allow you to spread your monthly expenses evenly over three months at no additional cost. On the other hand, Uni “pay later” cards go beyond the transaction level. In the case of Uni, you can choose which transactions you want to pay in full and pay the rest over the next three months. “Pay later” cards issued by fintech companies often focus on millennials who are digitally active but lack a credit history. Fintech companies give them these cards with a credit limit as low as ₹2,000. However, the card limit increases dynamically over a period as they spend more and pay off the bill on time.

Credit cards vs “pay later”

Pay later cards are an emerging form of small loans bundled into a card, aimed at millennials and Gen Z customers. In contrast, credit card issuers have specific predefined eligibility criteria. This way, consumers with no credit history or those with very meager incomes can get a “pay later” card. However, obtaining a credit card depends on the individual’s creditworthiness, repayment behavior and income stability.

Raj Khosla, founder and managing director of MyMoneyMantra.com, says the extended credit limit on a “pay later” card is usually relatively lower than that offered on a credit card. On a “pay later” card, the credit limit starts from ₹2,000 and can go up to a maximum of ₹10 lakh, while credit limits on a credit card usually start from ₹20,000. There is no upper cap on credit card limits because the lender can increase your credit limit based on your usage, income, and frequency of spending.

“Currently, ‘pay later’ cards only offer the option of splitting the transaction amount into three equal installments, while credit cards offer the option of longer equivalent monthly installments (EMIs) that can be s ‘extend up to 36 months,’ Khosla added.

Also, with “pay later” cards, you don’t have to pay recurring interest, i.e. there are no interest charges applied on new purchases during that you make a partial refund of the invoice. However, in the case of credit cards, if you make late or partial payments, interest is charged from the date of the transaction. Sachin Vasudeva, Associate Director and Head of Credit Cards, Paisbaazaar.com, says the biggest drawback of a credit card is the high interest rate on revolving credit. This means that even a few missed payments can send you into a spiral of debt. “Credit cards with revolving credit interest rate finance charges are significantly high at 30% to 45% per year, while “pay later” cards charge 20% to 30% (non-renewable) in case of non-payment,” says Vasudeva. .

Yet, the benefits and rewards offered on a credit card are generally higher and more diverse than the benefits available on a “pay later” card. Pay later cards offer approximately 1% cash back on timely bill payment; Credit cards offer several other benefits such as cash back, rewards points, discounts and airline miles. says Khosla, “Users can choose the type of credit card based on their spending habits to get maximum benefits, while the benefits of ‘pay later’ cards are similar across the board.”

Debit Cards vs Credit Cards/Pay Later

Debit cards, credit cards, and “pay later” cards are all different payment options. “Comparing debit cards with credit or pay-after cards is completely unfair, as the former represent your money in bank accounts, while credit and pay-after cards are a form of unsecured lending. which is grouped in a plastic (card). “In addition, after transactions made with credit cards and “pay later” cards, you are still obligated to honor future bills. In contrast, debit card payments mean that you settle the transaction immediately after have spent.

Vasudeva says, “Because debit cards are directly linked to your savings or checking account, they are best used for small expenses and ATM withdrawals, usually those you can prepay without deplete your savings. Debit cards allow you to withdraw cash from ATMs for free. But withdrawing money using a credit card or “pay later” card will incur high interest rates because these transactions are treated as cash advances.”

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You can use these cards at online and offline stores, ATMs, and point-of-sale (PoS) terminals. The benefits and rewards associated with these cards are purely subjective to the nature of the transaction. To get the maximum benefits, you should use these cards interchangeably depending on the nature of the transactions you make.