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. For smaller purchases, you usually pay it off over a few weeks. For bigger purchases, it may take several years to pay off.
You usually 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 options include:
- Afterpay
- Brighte
- Humm
- Klarna
- Payright
- StepPay
- 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
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 may be charged fees to use the service
- Multiple services are hard to manage — if you sign up for more than one service at a time, it can be hard to keep track of payments
- It might affect a future loan application — buy now pay later arrangements, late fees and even applications for a buy now pay later arrangement might appear on your credit report. Lenders may consider this when you apply for other loans (for example, a car loan or mortgage).
- 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 may charge:
- late fees — if you miss a payment or pay late
- monthly account-keeping fees — a fixed monthly fee
- payment processing fees — some charge an extra fee each time you make a payment
- establishment fees — some charge a fee to set up the account
You may also have to pay bank fees:
- overdrawn fees — if you don't have enough money in your account to cover the scheduled repayment
- interest — if you are paying by credit card
Some buy now pay later arrangements must have limits or 'caps' on the fees they can charge. To see if there's a fee cap, check your contract.
What to do if you get into trouble
All buy now pay later providers are required to have complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments.
See financial hardship for more practical steps to get help.
If you're unhappy about a service or product, you can complain.
Financial counselling
Financial counsellors help you manage debts and get your finances back on track. This is a free and confidential service.
Call the National Debt Helpline on 1800 007 007. Monday to Friday, 9:30am to 4:30pm. Or live chat, Monday to Friday, 9:00am to 8:00pm.
Aboriginal and Torres Strait Islander people can call Mob Strong Debt Helpline on 1800 808 488. Monday to Friday, 9.30am to 4.30pm.
Debt management
Call Way Forward on 1300 045 502. Monday to Friday, 9:00am to 7:00pm. If you're in financial hardship, they can arrange a debt repayment plan on your behalf. This is a free service.
Tips for managing buy now pay later
To make the most of buy now pay later services:
- Set a limit — stick to a spending limit you can afford
- Use one service at a time — avoid multiple buy now pay later services as they make it harder to manage your payments
- Budget for your payments — include bills, loan payments and buy now pay later payments
- Link to your debit card — 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 buy now pay later, add the repayments to your budget — and your calendar.
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.