What’s the best credit card for Buy Now Pay Later (BNPL) platforms?

If you’ve been shopping online lately, you might have noticed that many e-commerce merchants have integrated Buy Now Pay Later (BNPL) services at check-out. Heck, you don’t even need to shop online; BNPL services are starting to appear at brick-and-mortar shops as well.

The concept is simple: the BNPL service pays the merchant first (less a processing fee), then bills the customer’s credit or debit card in a series of smaller installments (typically 3 monthly payments). Merchants get their money upfront; customers have more time to pay for the purchase. 

These are the main BNPL players currently in the Singapore market:

	Installments	Late Payment Fee
Merchant List	3 months	S$20-60
Merchant List	3 months	S$5-30
Merchant List	3 months	From S$15
Merchant List	3 months	S$10-60
Merchant List	3 months or 4 fortnights	S$1-40
Merchant List	3 months	None

Contrary to popular belief, BNPL services do not charge interest. Instead, delinquent customers are charged late payment fees, which range anywhere from a few dollars to up to S$60 (services typically cap the maximum fee payable per transaction). It’s certainly less expensive than missing a credit card payment, although you obviously don’t want to do either. 

Now, enough ink has been spilled as to whether BNPL services are useful innovations, or predatory lenders encouraging excessive consumerism. I’m not going to wade into the debate, suffice to say I view BNPL the same way I view credit cards: great if you know how to use them, dangerous if not.

If you use BNPL purely for the benefits (see below) and never pay a cent of late fees, good for you. If you think BNPL might tempt you to spend beyond your means, avoid it like the plague. 

What are the benefits of using a BNPL service?

Here’s what I see as the key advantages of using a BNPL service:

(1) Enjoy customer acquisition offers

BNPL services are still fairly nascent in Singapore, which means we have an old-fashioned land grab on our hands. This is the time where VC money is splashed around in the hope of gaining market share, and (for now) it’s advantage consumer.

For example:

• Atome has various merchant-specific deals, including a tie-up with CapitaLand where you earn 3,000 STAR$ upon sign-up, and 5,000 STAR$ on your first purchase (equivalent to an S$8 voucher)
• Pace is giving S$50 off a min. spend of S$250 with the OCBC YES! debit card
• Rely has a cashback system that gives back 10-20% of the order value, subject to a cap

(2) Conserve 4 mpd caps on specialised spending cards

Imagine you’re planning to buy a S$2,400 laptop on Qoo10. You want to pay with your Citi Rewards Card to earn 4 mpd, but there’s a small hitch. The 4 mpd is capped at S$1,000 per statement month– if you charge the whole purchase, you’d earn S$1,000 * 4 mpd + S$1,400 * 0.4 mpd, or a weighted average of just 1.9 mpd. 

Qoo10 (nor most e-commerce sites) won’t let you split the payment over different cards, but with a BNPL service you don’t have to. Suppose I put this purchase on a 3-month plan with Rely. My card would be charged:

• Month 1 (upfront): S$800
• Month 2: S$800 
• Month 3: S$800

I’d then be able to earn 4 mpd on the full S$2,400 amount, netting 9,600 miles. I also have the freedom to change the card used to pay for Month 2 and 3’s installments, if I so wish. 

Even if you’re a cashback user, the same argument applies. By splitting the payment over multiple months, you can more effectively utilize your bonus cashback cap. 

(3) Stretch your cashflow

This is the most obvious benefit of all, but it’s still worth re-emphasizing. By splitting your payments into interest-free installments, you get to hold on to your cash longer, improving your cashflow position. 

What card should I use for BNPL?

So assuming you’ve decided to take the plunge, the natural question becomes which card to charge your monthly installments to. Here’s the MCC that various BNPL services code as:

BNPL Service	MCC*
	5999: Misc. and Specialty Retail
	5399: Misc. General Merchandise
	5999: Misc. and Specialty Retail
	5999: Misc. and Specialty Retail
	5399: Misc. General Merchandise
	7399: Business Services Not Elsewhere Classified
*MCCs derived from Visa Supplier Locator. They may be different for Mastercard, but it’s unlikely.

BNPL transactions will be processed online, which means the following cards could be candidates: 

	MCC 5399	MCC 5999	MCC 7399
Citi Rewards	✔	? (see comments section)	✔
DBS WWMC	✔	✔	✔
HSBC Revolution	✔	✔	✘
OCBC Titanium Rewards	✘	✘	✘
KrisFlyer UOB Card	✔	✔	✘
UOB Lady’s Card	✘	✘	✘

Here’s the good news: it’s possible to earn up to 4 mpd on BNPL transactions, at least for now. 

The Citi Rewards or DBS Woman’s World Card would be the safest bet, since they award 4 mpd on (almost) all online transactions. However, the HSBC Revolution is also an option for every BNPL service except Split. 

On the other hand, you’ll want to avoid using the UOB Lady’s Card, since none of the BNPL MCCs are eligible for 4 mpd, even if you choose “Shopping” as your quarterly bonus category. Likewise, avoid the OCBC Titanium Rewards for the same reason. 

The key question I have is: how long will this last? Banks don’t award miles or cashback on their own installment plans, so why should they for a third party’s?

Of course, it’s important to remember that the model is slightly different. Banks may not give rewards for their own installment plans because they’re the ones bearing the cashflow costs (they have to pay the merchant immediately, but collect the money from the cardholder in stages). With BNPL, that burden is shifted to the BNPL platform. So long as they’re paying the bank a healthy MDR, I don’t see any reason to exclude them. 

Conclusion

For those who use them the smart way, BNPL platforms are a way of maximizing your credit card rewards and cash flow, while enjoying some of that sweet VC money in the process. 

Read all the fine print, don’t spend beyond your means, pay your installments on time and in full, and you’ll be fine.