Buy now pay later (BNPL) providers allow you to buy something right away and spread out the cost over time. 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 (BNPL) is the term used to refer to interest-free credit providers. BNPL allows you to spread the cost of purchases over time rather than paying large amounts of money upfront for items you want or need.
Many people are even cutting up their credit cards in favour of this potentially more attractive shopping solution. However, interest-free doesn't mean it won't end up costing you far more in the long-run.
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
No
49.11%
Afterpay
37.2%
PayPal Pay in 4
17.13%
Zip
16.93%
Humm
4.82%
Openpay
4.23%
Klarna
3.94%
Other
2.66%
Bundll
0.49%
Source: Finder survey by Pure Profile of 1016 Australians, December 2023
How does buy now pay later work?
BNPL works by giving you a credit limit which you can use to pay for things. You can then choose a repayment frequency to spread the cost of those items out over time. BNPL providers tend to advertise repaying over something like 4 to 8 weeks, but you can also choose to repay fortnightly or monthly.
It is similar to the interest-free deals major retailers have offered for years by allowing you to delay paying on your purchases. The difference is that you are effectively borrowing money from a third-party provider which is available in a range of different stores, as opposed to a single retail outlet.
Most interest-free platforms, including Afterpay, charge the retailer a fee per transaction. This is how they 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.
On top of that, they can also charge various fees if you miss repayments.
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. There are differently eligibility criteria for each: if you are a foreign resident there may be extra verification steps to go through.
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?
BNPL providers might advertise that they are interest-free, but they have other ways of charging you extra.
Some will 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.
Compare buy now pay later providers in Australia
Provider
How it works
Costs
Credit check required?
Learn more
Afterpay
Select Afterpay at the checkout online or in-store. Repay in 4 equal instalments over 6 weeks.
Late payment fees of $10 for each late instalment and a further $7 if you still haven't paid the next week. Late fees are capped at 25% of the order value or $68, whichever is less.
No
Brighte
Interest-free plans specifically for home improvements or home energy installations.
$2.30 weekly account-keeping fee
$75 establishment fee
$4.99 late payment fee (capped at $49.90 a year)
Yes
humm
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 of 3 - 72 months.
$30-$110 establishment fee, or;
$29 if you've used humm before
$8 monthly fee
$6 late payment fee
Depends on loan amount
Klarna
Shop now with over 200,000 online retailers including Myer, H&M, JB Hi-Fi, Amazon, Coles and Woolworths and pay later over 4 interest-free instalments.
Late fees apply based on order value
Yes
PayPal Pay in 4
Select PayPal Pay in 4 at checkout online. Repay in 4 equal instalments over 6 weeks
$30 minimum spend, $2000 maximum spend
No fees, including late fees
Yes
Zip Money
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 and receive 3 months interest-free.
$0-$99 establishment fee
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 Pay
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.
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 January 2024
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.
With legislation passing through parliament to include BNPL as a credit product under the National Consumer Credit Protection Act, BNPL providers may need to conduct proper credit checks in the not-too-distant future.
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.
Expert insight: Beware of buy now pay later if you want to buy a home
"Most mortgage lenders will look at the living expenses of an applicant. If an applicant is using buy now pay later services more than what they have in their savings this could be a red flag and lenders could question whether they can afford a loan. Services like Afterpay also reserve the right to report negative activity (missed payments) on your credit history, meaning if you miss payments this could impact your credit score negatively."
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
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.
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 feel like you have a bit more financial freedom. 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 and you still need to pay it.
Remembering too that if you buy too much and can't repay, you'll likely end up with late repayment fees. Consider when bills or other costs will come out of your account and factor in the additional charge of the BNPL payments.
3. Set up payment alerts
Most BNPL providers take direct debit payments automatically. If you forget a payment and there isn't enough money in your account, not only might you end up with a late fee but your credit rating could take a dent. Avoid this by setting a reminder a few days before your repayment is due so you can make sure the money is ready in the account.
Or if you know you won't have the cash in time, 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've changed your mind about, 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.
"A few years ago I opened a buy now pay later account. I just needed a couple of hundred dollars to buy some furniture after I'd moved to an apartment that had no bedroom storage. With all the other costs of moving I just needed a bit of breathing space and thought that spacing out the cost would help. And it did! The problem was that other costs then came up that I turned to BNPL for. It can quickly snowball. I was still repaying on time, but that then meant I was offered a higher credit limit. Then I was offered another higher credit limit. You can think you're financially savvy, but having access to that credit which doesn't really feel like credit can make you not take it seriously. I was picking things up that normally I would have saved and waited for and then had a few emergency costs to pay for. Before I knew it I had spent more than I could repay in the fee-free timeframe. I ended up with frustrating account fees until I could pay off the entire balance - and they still kept offering me higher limits."
The key thing to consider before you apply for BNPL is whether you really need to make the purchase at that time. Can you spend a couple of weeks saving up, instead?
Otherwise, these are some other considerations you'll need to make before you commit:
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.
Frequently Asked Questions about buy now pay later
Afterpay is the most popular and widely-used buy now pay later platform in Australia.
Yes, there are a number of buy now pay later platforms in Australia that allow you to purchase something with no money upfront, including Zip Pay and Humm.
Alternatives to Afterpay include Zip Pay, Klarna and Humm, which offer similar buy now pay later services and have similar payment plans and fee structures.
Most buy now pay later platforms, like Afterpay, do not conduct credit checks when you apply for an account. Afterpay also states that their Buy now, Pay Later payment plans will not affect your credit score, as they are not reported to credit reporting agencies.
Elizabeth Barry was 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. See full bio
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Elizabeth has written 211 Finder guides across topics including:
A personal finance expert and frequent media commentator, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a frequent commentator and contributes regularly to TV, radio and in digital or print media. In 2023 and 2024, she appeared in the media over 2,500 times, sharing tips and strategies for Australians to make their money work harder for them. See full bio
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Sarah has written 194 Finder guides across topics including:
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
Finder
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
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?
PayPal Pay in 4 is a buy now pay later service available across thousands of retailers globally. Split your repayments into 4 equal instalments paid over 6 weeks.
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.
Make large purchases by paying less with a Zip Money line of credit offering flexible repayment options, a long interest-free window and thousands of merchants to choose from. Find out if it's right for you.
Why get charged interest when you don't have to? Openpay lets you shop at a range of retailers and pay back your purchase in regular, interest-free instalments. Read this review to see if it's right for you.
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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
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
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