Buy Now Pay Later (BNPL)

Buy now, pay later services can help you spread out the cost of your purchases without paying interest.

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Interest-free finance, commonly referred to as "buy now pay later", is an increasingly popular way for shoppers to pay for purchases. In fact, in March 2021 the RBA reported that the value of BNPL transactions grew by 55% in 2019/20. These platforms, such as Afterpay, Zip, Openpay, Humm, and Klarna allow you to buy something right away, spread the cost out over time and not have to to pay interest.

While interest-free finance isn't like a traditional loan, there are still costs involved, and it's important to understand what you're getting into before you apply. Here, we go through the differences between the platforms, the costs and how they work, so you can decide which one is right for you.

humm ($1 - $1,999)

humm ($1 - $1,999)

  • Fast approval
  • No interest
  • No hard credit checks
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humm ($1 - $1,999)

Borrow up to $1,999 interest free with humm. Pay off your balance faster with penalty-free extra repayments. Submit your application online to get started.

  • Interest Rate: 0%
  • Credit limits up to $1,999
  • Fast, online application
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Compare buy now pay later options

Name Product Interest rate (p.a.) Min. loan amount Max. loan amount Establishment Fee
humm  ($1 - $1,999)
0%
$1
$1,999
$0 (Up to $90 on bigger purchases)
Zip Pay
0%
$250
$1,000
$0 establishment fee. $6 monthly fee applies.
humm ($2,000 - $30,000)
0%
$2,000
$30,000
$90 ($35 to $90 only applicable when applying for over $2,000.)
bundll
0%
$1
$4,000
$2.50 (If you snooze a payment, you will have to pay a fee of $2.50.)
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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 that you want or need.

How does buy now pay later work?

Buy now pay later 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 buy now pay later

  • 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 Pay because it takes away one of the biggest barriers to closing a sale – it allows shoppers to spend money they don't have.

Another way that interest-free finance platforms make their money is through fees charged for late payments. Because repayments are deducted from your nominated account or card automatically, if there are insufficient funds and you do not reschedule your repayment, you will be charged a late payment fee.

These late payment fees are usually fairly low, roughly between $2 and $12 for smaller orders. However, this can vary a lot from platform to platform, and some companies may charge much higher fees. These fees can add up and send you on a debt spiral quite quickly if you're not careful.

Some buy now pay later providers may charge other fees, such as monthly account-keeping fees, payment-processing fees or early exit penalty fees. Double-check which fees are outlined through the specific provider as charges will differ from platform to platform.

Do buy now pay later platforms conduct credit checks?

Most buy now pay later 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.

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Compare buy now pay later providers in Australia

ProviderHow it worksCostsLearn 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
Zip MoneySign up online or at the checkout and receive a line of credit between $1,000 and $30,000. You can then use it at any Zip Money retailer.
  • Receive 3 months interest-free
  • 19.90% p.a. rate applies after 3 months to outstanding balance
  • $6 monthly fee applies when you have an outstanding balance
  • Late fees apply
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. A $6 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
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
OpenpaySelect Openpay at the checkout online or in-store. Repay in fortnightly instalments.
  • Processing fees of $2.50 to $3.95 for long plans
  • Late fees apply
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
CreditLineShop at participating merchants for an interest-free promotional period. Get your choice of three 0% interest plans.
  • Establishment fee of $25
  • Monthly account servicing fee of $4.95 for balances over $10
  • $20 late fee
  • ATM and EFTPOS withdrawal fees
  • Payment advance
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
BundllShop online or in-store at all locations that accept MasterCard and bundle everything from food, train tickets and fuel to entertainment. You can repay interest-free in 14 days.
  • No early payout fee
  • Late fees apply after a 24-hour grace period
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
LatitudePayShop online or in-store and pay in 10 weekly payments. Retailers include Harvey Norman, The Good Guys and Kitchen Warehouse.
  • No sign-up fee
  • No interest
  • $10 late payment fee
  • Transaction fee for merchants

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 buy now pay later 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 six months. For larger purchases, you may not have to repay your purchases in full for up to two 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 four 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 buy now pay later provider you used to make the purchase as soon as possible. Most providers will allow you to defer the repayment date by a week or two 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.

How to make the most out of buy now pay later

Our four expert tips and tricks for getting the most out of your buy now pay later service:

1. Know your rights

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

  • Refunds. Most buy now pay later services provide full refunds for returns.
  • Credit assessment. Many do not assess your credit, unlike credit card or personal loan companies (though some buy now pay later providers, particularly those with higher credit limits, may do).1
  • 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 buy now pay later contract than you would with using a credit card or a personal loan.2
  • If you run into issues. Buy now pay later schemes are not required by law to help you if you run into financial trouble, or trouble with your merchant.
  • Can list defaults. Buy now pay later 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 buy now pay later 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 buy now pay layer 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. And most buy now pay later 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 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 them 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 buy now pay later 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, interest might be charged 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 a credit card with a 0% p.a. introductory interest rate 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 Customer Care
      JoshuaAugust 28, 2018Staff

      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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