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Buy now pay later (BNPL)

Buy now pay later apps spread the cost of your purchase over several weeks, which can make things more affordable – if you don't overspend.

Important changes to Buy Now Pay Later in Australia

In May 2023 the Australian Government announced that the Buy Now Pay Later industry would be regulated to comply with the Credit Act. These changes are not yet in effect, and are planned to be legislated later in the year.

Among the proposed changes are a cap on late or missed payment fees, stricter marketing requirements and an improved hardship processes for customers.

Buy now pay later (BNPL) providers allow you to buy something right away and spread out the cost over time, usually 4 weeks. You don't have to pay any interest, but fees and charges can quickly add up if you miss your payments.

Compare buy now pay later services

1 - 5 of 5
Name Product Interest rate (p.a.) Min. loan amount Max. loan amount Establishment Fee Credit Check Required?
Zip Pay
0%
$350
$1,000
$0 establishment fee. $9.95 monthly fee applies.
Yes
humm  ($1 - $1,999)
0%
$1
$1,999
$0 (Up to $90 on bigger purchases)
No
Afterpay
0%
$35
$1,500
$0 establishment fee
No
Klarna
0%
$35
$1,000
$0 establishment fee
Yes
Paypal Pay in 4
0%
$30
$2,000
$0 (This service is interest and fee-free)
Yes
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What is buy now pay later?

Buy now pay later is the term used to refer to interest-free credit providers. Many people are even cutting up their credit cards in favour of this potentially more attractive shopping solution.

These interest-free platforms allow you to spread the cost of purchases over time (usually about 8 weeks), rather than paying large amounts of money upfront for items you want or need.

Finder survey: How many Australians have used a buy now pay later service?

About half of Australians we surveyed have used at least one form of buy now pay later.

Response
No49.11%
Afterpay37.2%
PayPal Pay in 417.13%
Zip16.93%
Humm4.82%
Openpay4.23%
Klarna3.94%
Other2.66%
Bundll0.49%
Source: Finder survey by Pure Profile of 1016 Australians, December 2023

How does buy now pay later work?

BNPL works in much the same way as the interest-free deals major retailers have offered for years by allowing you to delay paying on your purchases and spreading the cost over a longer period of time. The only difference is that you are effectively borrowing money from a third-party provider that is available in a range of different stores, as opposed to a single retail outlet.

It works in a similar way to lay-by, but instead of securing an item for later purchase, you receive your goods right away.

How to use BNPL

  • Sign up with a provider. Sign up either online or in-store. You can usually get on-the-spot approval.
  • Make your purchase. Some providers only work with partnered merchants, whereas others are accepted anywhere that takes credit cards.
  • Pay back what you spend. Repayments are usually made in regular instalments and are automatically deducted from your nominated card. You need to make sure that you have sufficient funds available to be able to cover the repayment.

Interest-free: What's the catch?

Most interest-free platforms, including Afterpay, charge the retailer a fee per transaction. This is how interest-free platforms make most of their money. Retailers benefit from offering options such as Afterpay and Zip because it takes away one of the biggest barriers to closing a sale – it allows shoppers to spend money they don't have.

Some BNPL providers charge monthly account-keeping fees, payment processing fees or early exit penalty fees. They also charge fees for late payments. Because repayments are deducted from your nominated account or card automatically, if there are insufficient funds and you don't reschedule your repayment, you'll be charged a late payment fee.

These late payment fees are usually fairly low, roughly between $2 and $12 for smaller orders. However, these fees can add up and send you on a debt spiral quite quickly if you're not careful.

Do buy now pay later platforms conduct credit checks?

Most BNPL platforms usually perform something known as a "soft credit check". This means that they will confirm your details and check your credit records for bankruptcy or Part 9 debt agreements, but the check won't show up on your credit score (like a "hard credit check" would). If you have major defaults on your credit record, you might not be eligible.

Other interest-free platforms may not check your credit score. Therefore, it's up to you to be realistic about what you can and can't afford to pay back. While interest-free platforms don't affect your credit record when you sign up, they can report defaults to your credit reporting body, which will negatively affect your score. Depending on how many payments you miss, you may also have to pay legal fees if action is taken against you.

Compare buy now pay later providers in Australia

ProviderHow it worksCostsCredit check required?Learn more
AfterpaySelect Afterpay at the checkout online or in-store. Repay in 4 equal fortnightly instalments.
  • Late payment fees of $10 and a further $7 if you still haven't paid the next week
No
BrighteSign up for a Brighte account online to pay for home improvements or home energy installations. All plans are interest-free.
  • $4 monthly account-keeping fee
  • $4.99 late payment fee
Yes
hummSign up for humm online or via the app to use at a range of stores and pay no interest. Apply for up to $30,000 with terms up to 60 months.
  • $0 monthly fee for terms of 2.5 months or less
  • $8 monthly fee for terms of 5–60 months
  • Late fees apply
Depends on loan amount
KlarnaShop now with over 200,000 online retailers including ASOS, H&M, Topshop, boohoo, Nasty Gal, MVMT and Abercrombie and Fitch and pay later over 4 interest-free instalments.
  • Late fees apply
Yes
LaybuyShop online or in-store at its partnered stores and pay in 6 weekly payments.
  • No sign-up fee
  • No interest
  • $10 late fee
  • Transaction fee for merchants
Yes
PayPal Pay in 4Select PayPal Pay in 4 at checkout online. Repay in 4 equal instalments over 6 weeks
  • There is no interest charged for using this service.
  • $30 minimum spend, $2000 maximum spend
  • No fees, including late fees
Yes
Zip MoneySign up online or at the checkout and receive a line of credit between $1,000 and $5,000. You can then use it at any Zip Money retailer.
  • Receive 3 months interest-free
  • 25.9% rate applies after 3 months to outstanding balance
  • $9.95 Monthly fee applies when you have an outstanding balance
  • Late fees apply
Yes
Zip PaySign up online or at the checkout for a credit limit up to $1,000. You can use your credit line at any Zip Pay retailer.
  • 0% p.a. interest rate
  • Up to 60 days fee-free, but a $9.95 monthly fee will apply after this period if you do not repay your purchase in full and will remain as long as you have an outstanding balance
  • Minimum monthly repayment of $40
Yes

All fees and charges have been fact-checked as of December 2022

Afterpay vs credit cards: Which is better?

What features are offered by buy now pay later platforms?

Each provider offers the following features with its BNPL service:

  • Varying loan term. Loan terms vary greatly depending on the provider and the retailer. For small-value purchases, loan terms can be as little as a few weeks to up to 6 months. For larger purchases, you may not have to repay your purchases in full for up to 2 or more years.
  • Variable purchasing power. Depending on the provider, you can receive purchases prior to payment costing as little as $35 up to as much as $30,000.
  • Repayment frequency. Again, it varies depending on the provider. Line of credit products generally require monthly repayments, whereas merchant payment options are commonly paid back in 4 instalments.
  • Convenience. All interest-free finance products can be applied for and approved in minutes at the point of sale or online.
  • Paperless. The application process and loan management is done online, so you won't need to physically print or sign anything.
  • Wide acceptance. Line of credit debit cards are accepted anywhere normal credit cards are accepted. The merchant payment option is only available at partner merchants. However, there are a number of businesses offering this payment option.
  • Ongoing. Unlike a loan, line of credit products do not expire once you pay off your debt. You can keep the card and use it again when required.

What to do if you can't meet a repayment

If you can't meet a repayment, it's important that you contact the BNPL provider you used as soon as possible. Most providers will allow you to defer the repayment date by a week or so without penalty. However, some providers may charge you a late fee for a missed payment.

Missing the payment without contacting your provider beforehand could see you receiving a black mark on your credit file. This could impede your chances of applying for credit in the future. Therefore, it's never a good idea to bury your head in the sand if you think you're not going to be able to meet your next payment.

Promoted
Long-term 0% payment plans at stores across Australia and no interest for 6 months on purchases of $250 or more. $8.95 monthly account fee applies.

How to get the most out of buy now pay later

Our 4 expert tips and tricks for getting the most out of your BNPL service are:

1. Know your rights

Your rights as a customer are likely to vary depending on which BNPL provider you are using. Therefore, it's a good idea to check the terms and conditions of your specific provider rigorously, prior to using its service. Generally, the below applies:

  • Refunds. Most BNPL services provide full refunds for returns.
  • Credit assessment. Many do not assess your credit, unlike credit card or personal loan companies (though some BNPL providers, particularly those with higher credit limits, may do).2
  • Defaults generally not listed. If you default on a repayment, most providers will not list this on your credit record.
  • Less legal protection. You have less legal protection with a BNPL contract than you would with using a credit card or a personal loan.3
  • If you run into issues. BNPL schemes are not required by law to help you if you run into financial trouble or trouble with your merchant.
  • Can list defaults. BNPL services can still legally list a non-payment as a default on someone's credit report, even if most choose not to.

2. Try not to spend more than you need to

It can be easy when using a BNPL scheme to end up spending more than you were planning to. Try to avoid overspending by bearing in mind that while the cost of the payments may be spread out over a longer period, it is the same amount of money.

On top of this, you run the risk of being charged late fees if at any point you don't have enough money in your account to cover an outgoing charge. Take into account weeks that you know bills or other costs will be coming out of your account and factor in the additional charge of the BNPL payments. Ensure that you will have enough money in your account for every payment date. And if it looks like it may be unlikely, remove that last impulse purchase from your cart.

3. Set up payment alerts

As mentioned earlier, missing repayments can leave a mark on your credit report.

Most BNPL providers take direct debit payments automatically. Therefore, if you forget a payment and there isn't enough money in your account, you could see your credit rating taking a dent. Avoid this by setting a reminder a few days before your repayment is due to leave your account.

This gives you time to make sure that the right amount of money is in there before the direct debit is taken. Or, if it's going to be impossible to have the cash in time, to contact the provider ahead of time to let it know. Often, providers will allow a repayment deferral of a week or more, free of charge, if they are notified in advance.

4. If you want to return an item, do so as soon as possible

To avoid paying for items you have changed your mind about, it's a good idea to make your returns as soon as possible. Ideally, you want to send or take items back before your next payment date. While most BNPL providers will refund you in full for returned purchases, it may take a few days for your refund to process. This means more time with less money in your account.

What should I consider before I apply?

While interest-free finance may be enticing and suitable in some cases, there are a number of factors to consider before using it:

  • Fees. All line of credit providers charge some form of fee. Most fees are associated with cash withdrawals and missing repayments. Some charge a fee for every single transaction.
  • Interest. Though most providers don't charge interest, some might charge it after an initial interest-free period. Rates can be high, in some instances up to 29% p.a.
  • Minimum repayments. The minimum repayments are unlikely to repay the loan within the interest-free period. If you do not make additional repayments you will be charged interest.
  • Credit record entry. Interest-free products are still a type of personal loan and can be recorded on your credit history if you don't meet your repayments. Be cautious of overusing or not repaying these products.

It's important to compare a range of interest-free offers before signing up. You can also consider an interest free credit card with a 0% p.a. introductory offer.


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3 Responses

    Default Gravatar
    RockyAugust 23, 2018

    we’re selling electronics(pcs, laptops…) in store only, price range $900 – $3000. We’d like to provide interest free purchase”to our customers. Which finance provider do you suggest ? Assume we need $40K – $50K per month. Thanks

      AvatarFinder
      JoshuaAugust 28, 2018Finder

      Hi Rocky,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      While we are unable to suggest specific companies, products, or services, you will have a better way of deciding which one is the right for you by reviewing our comparison table above. From there, you can then click on the “Read the review” button to learn more about them.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

    Default Gravatar
    RobertMarch 22, 2017

    Sir/Madam,

    Thank you for your finder.com.au, a very honest and helpful website,
    My question is this, Is there any interest-free finance provider who can be accepted anywhere that takes their credit card?
    The reason for my question is this: When shopping at a participating partnered merchants they jack their prices up to compensate for the interest-free finance provider unlike when paying cash you get a good discounted deal for your purchase?

    Thank you.

    Kind regards,
    Robert

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