How does a BNPL app differ from a credit card?
BNPL apps are installment loans, while credit cards are revolving loans. Between those two, revolving loans come with a higher risk of a debt spiral.
When you make a purchase with a BNPL app, you agree up front to pay it off within a specified time frame. When you charge a purchase to a credit card, you can opt to make a minimum payment each month with no set time to pay it off.
However, BNPL plans typically don’t build credit like a credit card and can sometimes come with high interest rates.
Do BNPL apps affect my credit score?
In most cases, no. While some BNPL plans perform soft credit checks, the majority of these services will not hurt your credit score as long as you make your payments on time. On the flip side, they also don’t help your credit score since BNPL providers do not make regular reports to credit bureaus.
How do BNPL virtual cards work?
Virtual cards are one-time-use digital cards created in BNPL apps and stored in virtual wallets, such as Apple Pay and Google Pay, for use at select online and in-person retailers.
Virtual cards are much safer than physical cards. Even if they’re hacked, your account won’t be compromised, and since they’re located in a digital wallet, you can’t lose them. However, the real benefit of virtual cards in the BNPL world is that they’re easier for merchants to adopt, giving BNPL users access to a larger pool of retailers.
