Buy now pay later means you pay by instalments over time, instead of paying the full amount upfront.
Find out how buy now pay later works and what you need to know before you sign up.
How buy now pay later works
When you use a buy now pay later service, you can buy a product and delay payment. You usually pay off your purchase over a few weeks. For bigger purchases, it may be longer.
You don't pay interest on the purchase. Instead you're charged fees.
Lots of shops offer different buy now pay later options. Buy now pay later providers include:
- Zip Pay
Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.
Before you sign up to buy now pay later
What to look out for
While buy now pay later can be convenient, it can be difficult to juggle repayments with other financial commitments.
In 2020, ASIC research into the buy now pay later industry found that in order to meet repayments on time, one in five consumers:
- missed or were late paying other bills or loans
- cut back on or went without essentials such as meals
Before you sign up, keep in mind:
- It’s easier to overspend — you can over-commit to spending what you can’t afford
- Fees can add up — you are charged fees to use the service
- It can be hard to manage — if you sign up for more than one service, it can be hard to keep track of payments
- It might affect a loan application — lenders consider buy now pay later spending when you apply for a car loan or mortgage
- Late repayments can appear on your credit report — this affects your ability to borrow money in the future
- Lay-by can be cheaper — lay-by has no account keeping or late fees
Compare the fees charged
Buy now pay later services are often advertised as 'interest free' or '0% interest'. But they charge fees that can add up quickly. They may charge:
- late fees — if you miss a payment or pay late, around $5 to $15
- monthly account-keeping fees — a fixed monthly fee, up to $10 a month
- payment processing fees — some charge an extra fee of around $3 each time you make a payment
- establishment fees — a fee to set up the account. For some there are no establishment fees, for others these fees can be up to $110.
To compare fees charged by different providers, see buy now pay later fees on the Australian Finance Industry (AFIA) website.
You may also have to pay bank fees:
- overdrawn fees — if you don't have enough money in your account to cover the repayment
- interest — if you are paying by credit card
Using a buy now pay later service
We explain how buy now pay later works and some tips on what to look out for if you use buy now pay later services
Tips for managing buy now pay later
To make the most of buy now pay later services:
- Stick to a limit and aim to have only one buy now pay later account at a time.
- Budget for bills, loan payments and buy now pay later payments.
- Consider linking your buy now pay later account to your debit card instead of your credit card. That way you're using your own money and avoid credit card interest.
If you sign up for a buy now pay later option, add the repayments to your budget — and your calendar.
What to do if you get into trouble
Most buy now pay later providers have dedicated complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments.
If you need help to get your finances back on track, talk to a financial counsellor. They offer a free and confidential service to help you understand your options and deal with money issues.
National Debt Helpline — 1800 007 007
The free National Debt Helpline is open from 9.30am to 4.30pm, Monday to Friday.
When you call, you'll be transferred to a financial counselling service in your state.
Mob Strong Debt Helpline — 1800 808 488
Mob Strong Debt Helpline is a free legal advice service about money matters for Aboriginal and Torres Strait Islander peoples from anywhere in Australia.
The helpline is open from 9.30am to 4.30pm, Monday to Friday.
Georgia pays more for buy now pay later
In the lead-up to Christmas, Georgia decides to take advantage of online sales. She finds a new pair of designer sneakers for $150. As money is a bit tight, Georgia signs up to a buy now pay later service to split her payments.
She then finds a hair straightener for $300 at another store. She uses a different buy now pay later service to buy the straightener.
A fortnight later, Georgia discovers that her bank account is overdrawn. Before she bought the items, she hadn't checked whether she would have enough in her account to make both repayments.
Both buy now pay later providers charge Georgia missed payment fees. Her bank also charges her an overdrawn fee. Georgia is now waiting to see if the record of late payment will appear on her credit report.