Best credit card hacks to go with your choice of 'buy now, pay later' service

While Buy Now, Pay Later (BNPL) services aren’t for everyone, savvy consumers can use them to maximise their credit card rewards. Here’s how.

If you’ve been shopping online or in-store lately, you may have come across a BNPL service like Atome or hoolah at check-out. 

For the uninitiated, these services allow customers to break up payments into a series of smaller instalments (typically three monthly payments). Zero interest is charged, and if you pay off your balance on time, it’s entirely free to use.

If you miss a payment, you’ll be charged a late payment fee which ranges anywhere from a few dollars to $60. 

	Instalments	Late payment fee
Atome	Three months	$20 – $60
hoolah	Three months	$5 – $30
OctiFi	Three months	From $15
Pace	Three months	$10 – $60
Rely	Three months / four fortnights	$1 – $40
Split	Three months	None

It can’t be emphasised enough that you should not be using a BNPL service to spend beyond your means.

While paying in instalments reduces the initial pinch and improves your cash flow, missed payments can lead to big problems down the road when you’re applying for a loan or credit card. BNPL services are useful if you know what you’re doing, dangerous if you don’t.

But assuming you’re financially disciplined and not hard-pressed for cash, there are actually three good reasons to consider paying via a BNPL service. 

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1. Earn credit card rewards on instalments

If you’re new to BNPL, you may wonder what all the fuss is about. Don’t credit cards offer zero per cent instalment plans with selected merchants too?

Yes, but here’s the catch: you won’t earn any credit card rewards on bank instalment plans. Banks are already taking the cashflow hit on their side; they’re hardly going to reward you with miles or cashback too.

On the other hand, payments to BNPL services are considered retail spend, which means you get to have your cake and eat it: enjoy interest-free instalments, plus credit card rewards. 

BNPL transactions are processed across three main Merchant Category Codes:

• MCC 5399 Misc. General Merchandise
• MCC 5999 Misc. and Specialty Retail
• MCC 7399 Business Services Not Elsewhere Classified

	MCC 5399	MCC 5999	MCC 7399
Atome		✔
Hoolah	✔
OctiFi		✔
Pace		✔
Rely	✔
Split			✔

MCCs are derived from the Visa Supplier Locator.

This means you can consider using the following cards to maximise your miles...

	Earn rate	MCC 5399	MCC 5999	MCC 7399
Citi Rewards	Four mpd	✔	✔	✔
DBS Woman’s World Card	Four mpd	✔	✔	✔
HSBC Revolution	Four mpd	✔	✔
KrisFlyer UOB Credit Card	Three mpd	✔	✔
UOB Preferred Platinum Visa	Four mpd	✔	✔

...and cashback. 

	Earn rate	MCC 5399	MCC 5999	MCC 7399
OCBC Frank	Six per cent cashback(Min. spend: $600)	✔	✔	✔
DBS Live Fresh	Five per cent cashback(Min. spend $600)	✔	✔	✔
Standard Chartered Spree	Two per cent cashback(No min. spend)	✔	✔	✔

My personal picks would be the Citi Rewards Card and DBS Woman’s World Card, simply for convenience since they cover the widest range of MCCs. Do note the respective caps, as outlined in the cards’ T&Cs. 

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2. Optimise the bonus caps on your cashback and miles cards

While the ability to earn credit card rewards on BNPL instalment payments is useful in itself, it gets even better. 

Suppose you’re planning to buy a $3,000 laptop on Qoo10. You’ve decided to pay with your Citi Rewards Card to earn four miles per dollar (mpd), but there’s a hitch. Citibank caps your four mpd at $1,000 per month. Exceed this threshold, and you earn a measly 0.4 mpd. 

Therefore, your choices are as follows:

1. Put the entire purchase on your Citi Rewards Card and earn four mpd on the first $1,000, then 0.4 mpd on the next $2,000 (total miles: 4,800)
2. Put the entire purchase on a general spending card like the DBS Altitude, which earns a flat 1.2 mpd on the entire $3,000 (total miles: 3,600)

Neither is optimal, but a BNPL service helps solve the problem.

Suppose you put the purchase on a three-month payment plan with Rely. Each month, your Citi Rewards Card is charged $1,000, which means that over three months, you’ll earn a total of 12,000 miles! 

The same argument applies even if you’re a cashback user. Suppose you use the OCBC Frank Credit Card, which awards six per cent cashback for online spending, capped at $25 per month.

Had you put the entire $3,000 purchase on this card, you’d earn just $25. But by breaking up the transaction over three months, you’ll get $75 cashback instead. 

Therefore, BNPL services help credit card users optimise their bonus miles or cashback caps when making big-ticket purchases. 

3. Customer acquisition offers

Since BNPL services are fairly nascent in Singapore, they’re going big to acquire customers and gain market share.

While these incentives should not be an enticement to use BNPL if you have concerns about your self-control, there’s no harm enjoying them if you’re using a BNPL solely for reasons one and two above.

Here’s a brief round-up of some of the offers. These change frequently, so always refer to the official websites for the latest.

• Atome offers various merchant-specific deals, including a tie-up with CapitaLand that allows you to earn 8,000 STAR$ (equivalent to an $8 voucher) when you sign up and make your first purchase
• Pace is giving OCBC YES! Debit card holders $50 off a min. spend of $250
• Rely has a cashback system with periodic offers at various merchants

ALSO READ: Premium credit cards: Which gives high income earners the best value?

Conclusion

There’s a lot of buzz about BNPL services now, and the MAS is starting to take a closer look at this relatively unregulated industry. It means we may see a shakeup soon in terms of how BNPL services are allowed to market themselves, acquire customers and charge late fees. 

At the end of the day, BNPL services are a double-edged sword. They can present the temptation to fall into a debt trap, or they can be tools for savvy consumers to get more from their credit cards. Use them wisely!

This article was first published in SingSaver.com.sg.