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.
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.
PayPal Pay in 4
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
How it works
Credit check required?
Select 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
Sign 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
Sign 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
Shop 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
Shop online or in-store at its partnered stores and pay in 6 weekly payments.
No sign-up fee
$10 late fee
Transaction fee for merchants
PayPal Pay in 4
Select 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
Sign 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
Sign 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
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.
HSBC Platinum Credit Card
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.
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.
Elizabeth Barry is the lead editor for Finder. She has over 10 years' experience writing about a range of topics with a focus on personal finance. You’ll find her writing and commentary in a range of publications and media including Seven News, the ABC, MSN, the Irish Times and Singapore Business Review.
With Zip Pay, you can get instant approval for a line of credit helping you to buy now and pay later. It is 100% interest-free and gives you complete control over how you make repayments. Find out exactly how it works.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.