Zip Money: Here’s how the buy now pay later service works

Buy now pay later services like Zip Money allow customers to spread the cost of purchases over time.

Many buy now pay later schemes, including Zip Pay and competitors like Afterpay, are interest-free, meaning you don’t have to pay any interest on purchases (but you may be charged fees). However, Zip Money enables customers to access a larger line of credit, with a caveat that interest will be applied after a certain point.


In this article:


What is Zip Money?

Zip Money is a buy now pay later service that offers customers a line of credit with limits of over $1,000, so it can be used to make larger purchases. Every Zip Money transaction is given a minimum interest-free period of three months, but Zip says some retailers may offer longer periods.

If you do not repay your purchase in full within the interest-free period, you will be charged interest on the remaining balance. Zip Money currently has a standard interest rate of 19.90% p.a. for new customers. However, Zip says to check your contract for interest rate details, as it may vary depending on the retailer.

What is the difference between Zip Pay and Zip Money?

Zip Pay and Zip Money are two different products offered by Zip. Zip Pay is generally better suited to smaller purchases than Zip Money. Zip Pay offers a credit limit of up to $1,000 and all purchases are interest free. In comparison, Zip Money offers a line of credit for amounts over $1,000 and interest may be charged on purchases.

There are also different minimum repayment amounts and fees for the two products. For example, Zip Money may charge an establishment fee to set up an account, whereas Zip Pay does not charge a fee for this. Zip says you can have both a Zip Pay and a Zip Money account at the same time.

Where can I use Zip Money?

You can use a Zip Money account to shop online and in-store wherever you see Zip at the checkout as an available payment method. Zip says it has over 22,000 partnered retail stores, including Amazon, Bunnings and Kmart. You can see a full list of where you can shop on Zip’s website. You can also use a Zip Money account to pay BPAY bills and buy gift cards.

What are the fees?

Zip may charge a once-off establishment fee to set up your Zip Money account. The fee will depend on your credit limit and starts from $25 (see more below).

Zip Money also charges a monthly account-keeping fee of $6, which will be charged if you still owe money on your account at the end of the month, or in other words if you don’t pay off your balance in full before then.

You may also be charged a late fee of $15 if you do not make your minimum monthly repayment (or pay your remaining balance if it is less than this) within 21 days of the payment due date.

Zip Money also charges a bank dishonour fee if you do not have sufficient funds in your account at the time of your scheduled payment.

If you pay bills with Zip, there is also a processing fee of $2.50 per bill.

On top of any fees, you’ll also be charged interest if you do not repay your outstanding account balance before the interest-free period ends. From that point on, Zip says interest will be calculated daily and charged to your account at the end of the month.

How much does it cost to use Zip Money?

Zip Money charges a range of fees, which can add up over time. You’ll also accumulate interest if you don’t repay your account balance within the interest-free period.

To show you how costs could add up, Canstar’s research team has calculated how much you could be charged on a range of purchase amounts if you only paid Zip Money’s minimum monthly repayment. By doing so, you may end up paying hundreds of dollars in both fees and interest and it could also take years to pay off your account balance.

Zip Money fees and interest costs with minimum repayments
Purchase amount Minimum monthly repayment Establishment fee Time to repay Total monthly fees Total interest Total cost in interest and fees
$2,000 $40 Or 2.5% of the outstanding balance (whichever is greater)* $25 6 years $432 $949 $1,406
$3,000 $80 $49 4 years and 2 months $300 $968 $1,317
$4,000 $80 $75 6 years $432 $1,895 $2,402
$5,000 $150 $99 3 years and 7 months $258 $1,341 $1,698
Source: www.canstar.com.au – 14/01/2021. Purchases made on a Zip Money account have a three-month interest-free period, followed by a 19.90% p.a. interest rate. Accounts have a $6 monthly account-keeping fee charged at the end of the month if there is an outstanding balance. Calculations assume that the purchase occurred on the first day of 2021, the minimum monthly repayment falls on the day after the purchase is made of each subsequent month, interest is calculated daily and charged monthly, and fees are not capitalised (added to the outstanding balance). *The minimum monthly repayment for Zip Money accounts is dependent on your individual account limit, and will be either a dollar figure or 2%-3% of your balance owing (whichever is greater; percentage assumed to be 2.5% for this example). Additional fees, charges and other terms and conditions may apply; contact Zip for more information.

To avoid fees, you need to pay off your outstanding account balance each month. To avoid interest, you have to repay your balance before the end of the interest-free period, which is three months unless the vendor you choose offers a longer one.

How do I apply for Zip Money?

You can apply for a Zip Money account through Zip’s website. To be eligible for a Zip Money account, Zip says you must:

  • Be at least 18 years old
  • Be an Australian citizen or permanent resident
  • Be employed in some capacity (although certain pensions may be accepted)
  • Earn more than $300 per week
  • Have a good credit history
  • Have your own valid and verifiable email address and mobile number

When you apply for a Zip Money account, you also need to decide which credit limit to apply for. The limit that Zip approves you for will likely depend on your circumstances and needs, including your ability to repay the credit. Zip Money currently offers the following options for new customers:

Credit limit Minimum monthly repayment Establishment fee
$1,000 $40 $0
$2,000 $40 $25
$3,000 $80 $49
$4,000 $80 $75
$5,000 $150 $99
Source: Zip as at 12 January 2021.

Zip says the online application process takes less than three minutes and you will generally get an instant outcome after submitting an application, unless Zip needs further information.

Once you have set up a Zip Money account and made a purchase, you can then set up your repayments to fall weekly, fortnightly or monthly at whatever amount suits you (provided this lets you meet the monthly minimum repayments). Zip says that minimum monthly repayments start from $40 and are determined by your credit limit.

Existing customers may be able to increase their credit limit to an amount up to or over $5,000. This is subject to eligibility requirements, including making consistent repayments on your account for over six months.

Does Zip Money affect your credit score?

If you fall behind on your Zip Money payments, this could also have a negative impact on your credit score. Zip says it may tell a credit reporting body if you fail to meet your repayments or commit a serious credit infringement.

Zip may perform a credit check on you when you apply for a Zip Money account. This may be done to verify your details and confirm you can make repayments. Zip recommends you check your credit score before you apply for an account. You can check your credit score for free with Canstar.

Should I use Zip Money?

Before you sign up for a Zip Money account, you may want to ask yourself the following questions:

  • Will you repay your outstanding balance in full? If you don’t pay off your account balance each month, you may be charged a $6 account-keeping fee and interest (if the interest-free period has ended). The standard interest rate is currently 19.90% p.a. for new customers.
  • Are you likely to make your minimum repayments on time? If you don’t make your minimum repayments on time, you may be charged a $15 late payment fee and your credit score could also be negatively impacted.
  • What other options do you have? Could you wait and save up for the purchase instead? If you have a credit card, how do its interest-free period, interest rate and fees compare? Have you looked at other buy now pay later services and compared the fees and charges?

If you do open a Zip Money account, make sure you use it responsibly and are aware of the fees and charges that may apply.

Cover image source: GaudiLab (Shutterstock).

This article was reviewed by our Sub Editor Tom Letts and Finance & Lifestyle Editor Shay Waraker before it was published, as part of our fact-checking process.

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