Given that credit line cards such as Lazypay, Slice, Postpe, Kreditbee etc are making headlines nowadays. I decided to look at the fine prints of these cards and I was surprised by the permissions they seek. Further, I will highlight a few potential issues that you may face with your Cibil score if you have too many of these cards.
Lazypay vs Slice vs Postpe vs KreditBee
As I had mentioned in my earlier post these cards are not credit cards. They act or behave like credit cards but in a true sense, they are just personal loans or lines of credit offered by some financial institution (bank or an NBFC).
Lazypay, Slice, Postpe, KreditBee etc know this thing and thus market their cards by relying more or less on 3 points
- Instant issuance
- No hidden charges
- Claim to improve Cibil score
I will try to focus on these 3 areas and share my concerns around them. As mentioned earlier, the idea is not to dissuade you from applying for these cards but to help you make an informed decision.
Lazypay, Slice, Postpe, KreditBee – Instant issuance but with lots of permissions
Below is the table where I have tried to summarise the kind of permissions Lazypay, Slice, Postpe, KreditBee seek from the user.
Like Slice card, Lazypay also links your social media accounts with your profile. Along with that, Lazypay also needs access to call records, SMS, media files, location and contact list. LazyPay has detailed here the personal information it collects from you.
Kreditbee card takes nearly the same data permission as that of Lazypay. On top of that, the app will read your financial SMSes (even historical) even when the app is not in use. Further, I found it strange that it needs family details, school and university details along with academic records and your vehicle details too 😳.
Just for easy comparison, the kind of permissions Slice card takes
- Facebook and Linkedin accounts
- Friend’s or reference’s contact number
- Not to forget the weird thing “if someone uses your promotion code, we may associate your name with that person and their usage of the Portal”.
Why do these apps need so many permissions?
Simple! To put you under social pressure in case you default. By seeking to pull data from your social media profiles, contacts list in mobile, place of work etc; the companies will be able to reach your contacts in case of a default. We all have heard of stories of lenders calling people on contact lists or relatives or even office bosses to put pressure and collect money back. (Disclaimer: I am not saying that any of the companies mentioned here do this, but just highlighting where things might go.)
Every BNPL company including Lazypay, Slice, Postpe, Kreditbee etc market their product with no hidden charges and low-interest rates compared to banks. But strangely most of them do not put out any link that tells the late payment charges, the interest rate in case of late payment etc upfront. Maybe there are no hidden charges but the information surely is 😈.
Why is that? Simply because these BNPL companies themselves don’t know at what rate their lending partner will be willing to lend to a particular customer. For eg. Kreditbee has a long list of financiers available here (at the bottom of page). Now definitely every company here will have a different rate of interest for different customers. Something which Kreditbee won’t know beforehand.
Nonetheless, the claim of being the lowest interest rate is also somewhat not true. I had done a comparison for Unipay card, where they had disclosed the charges that they levy. Only in a few scenarios, the effective interest rate was lower than that charged on a credit card.
Improve CIBIL score
Again, nearly all the BNPL companies including Lazypay, Slice, Postpe, Kreditbee claims that by taking their cards, users can improve their credit score. While this is true to a great extent, it’s the same with any loan that is availed and paid back on time. This applies to even the 10-15k loan that you may take for buying a mobile phone.
Having said that there are issues several BNPL users have faced. Some of them are as below and none of them actually bode well for you.
Multiple loans are reported in credit bureaus.
2-3 reasons why this happens. Primarily it is due to co-lending. Under co-lending, 2 financial institutes participate in a loan in a pre-determined ratio, generally 80-20. Thus, both these institutes’ names will appear in your credit report. Thus, when you will look at your report, you may find more credit lines than the number of cards you own.
Secondly, say you have a credit line is with one institute. Further, you happen to buy a product on 6-EMIs. Now this purchase will be recorded as a second loan against your name. This happens with Lazypay for sure, not sure, if others follow the same or not. Thus, you end with 2 loans on one BNPL card. This may also result in multiple credit enquiries; as every time you opt to want to check your eligibility for that 6-9 month EMI, the lender will check your score first.
Another possibility is at the start your credit line is with XYZ lender. Sometime later due to a change in commercials between the lender and the card issuer, your loan may be moved to another lender. Now, in this case, if the previous lender doesn’t update your Cibil accordingly it will show 2 loans against your name.
BNPL is a personal loan and not a credit card loan
Further, all these loans are reported as Personal Loans in your report and not as credit cards. Now while you may find your score improving due to these BNPL cards, lenders view too many active personal loans unfavourably. Too many active personal loans indicate that you are credit hungry and thus a lender may not be willing to give you further credit.
As I have said before, the idea behind highlighting these things is not to discourage you from applying for any of Lazypay, Slice, Postpe, KreditBee cards, but to make you aware of what you are getting into. You have to make a final decision depending on your comfort level.
If you are looking to get any of these cards to improve your Cibil score, I believe taking a secured credit card such as Kotak 811, OneCard Lite etc is still a better option. In case you are taking these cards since you are a student or your income doesn’t meet the criteria for credit cards, I suggest focusing on your education or job/business and soon banks will line up to offer their best cards to you.
Have you faced any issues with BNPL cards and Cibil reporting? Are you comfortable sharing the details these companies ask for? Do share your views and experiences in the comments below.
In the interest of full disclosure, Credit Cardz may earn a referral bonus for anyone that’s approved through some of the links in this post. However, opinions and views expressed here are of the author's alone and not those of the bank, credit card issuer, or anyone else and have not been reviewed, approved or otherwise endorsed by any of these entities.