Compare buy now pay later companies in Australia
There are over a dozen ‘buy now pay later’ services in Australia.
If you already use buy now pay later services, or if you are considering signing up, you may want to compare providers and consider if it’s right for you overall.
What is buy now pay later?
Buy now pay later (BNPL) is a type of financial product that allows you to buy goods or services instantly and pay for it in instalments. Popular BNPL providers include Afterpay, Zip and humm. BNPL services can be used at a growing number of retailers in Australia, both in-store and online.
BNPL has some similarities to the lay-by system, although there are also some important differences to be mindful of. With lay-by, a store puts goods aside for you and you have to pay for it in two or more instalments before you can take it home. With BNPL services, the BNPL company pays the store for the goods upfront and you can take your purchases home immediately. You then pay for the goods in instalments, and these payments go to the BNPL company instead of the store. Moneysmart also notes that some BNPL providers charge account-keeping and late fees, whereas this generally isn’t the case for lay-by.
How does buy now pay later work?
You can apply for a BNPL account via a provider’s app or website. When you sign up for an account you will usually be given a spending limit, such as $600 or $1,000, based on the information you provide. Some BNPL providers may also do a credit check on you.
When shopping online with partner retailers, you can select the BNPL provider as your payment method at checkout and log into your account with that provider. If shopping in-store, many BNPL companies now allow you to add a digital card to your digital wallet, and you can use this card to make tap-and-pay purchases.
Your repayments are typically deducted automatically from the card or bank account you have attached to your BNPL account. This happens in regular instalments – commonly weekly, fortnightly or monthly. Some providers also let you make your repayments earlier.
What kind of fees do buy now pay later companies charge?
This will vary depending on the BNPL scheme you choose. Many (but not all) BNPL schemes charge no interest, but they may charge fees such as as:
- Late fees: charged if you miss a payment or do not pay your payment on time. This type of fee generally ranges from $5 to $15 per missed instalment, and some providers put caps on the amount you can be charged.
- Monthly fees: some providers charge a fixed monthly fee (sometimes called an account-keeping fee), up to $8 a month. In some cases it will be waived if you have no outstanding account balance.
- Establishment fees: some providers charge a fee to set up your account. This can be up to $99.
- Payment processing fee: some providers also charge a fee for each payment you make. This can be around $3 per payment.
If you don’t have enough money in your account at the time of the payment deduction, your bank may also charge you an overdraft fee, or interest if you are paying by credit card.
Compare buy now pay later providers in Australia
Below we’ve listed some of the BNPL providers in Australia. We’ve given a brief overview of how they work and what they cost. Make sure you check with any individual provider you’re considering to confirm the details of their service, including what fees they charge.
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Recent Award Winners
What is the best buy now pay later company in Australia?
The ‘best’ BNPL provider will depend on your own financial situation, including your spending habits and how you intend to use your account. Before signing up for a BNPL service, consider whether you will realistically pay your instalments on time and avoid late payment fees, as these can add up over time.
If you’ve decided BNPL is right for your circumstances, Canstar’s 2021 Buy Now Pay Later Awards could help. Canstar’s expert researchers assessed a range of BNPL providers to see which ones offered the best value. Their assessment took into account price and features, as well as consumer protections and support.
Canstar’s researchers found that Afterpay and Humm offered the best value to customers, while Afterpay had the most satisfied customers. Read more about why the winners came out on top.
What are the pros and cons of buy now pay later?
BNPL services can be convenient forms of payment for some. They may appeal to people who want to spread out their payments but still receive a product or service instantly, without having to use a credit card. But there can also be some significant costs and risks involved.
Pros
- You can pay off your purchases over time, rather than one large amount. This could help with budgeting.
- You may be able to avoid paying some fees and interest if you make your payments on time, depending on the BNPL platform.
- You can usually get approved and set up an account quickly.
- You can typically set up automatic repayments.
Cons
- It can be easy to overspend.
- You can be charged fees and these can quickly add up. You may also be charged interest by some platforms in certain circumstances.
- Your credit score may be impacted. If you don’t make your payments on time, some BNPL providers will report this to credit reporting bureaus.
- Future credit or loan applications could also be impacted. If the BNPL provider does a credit check on you, this usually appears on your credit report and will be visible to future providers. Likewise, late or missed BNPL payments could make it harder for you to take out a loan in future.
- BNPL services are not subject to the National Credit Code, meaning you do not have the same degree of legal protection as you do with credit cards or personal loans.
Is buy now pay later regulated in Australia?
On 1 March 2021, a group of eight of Australia’s largest BNPL companies signed up to a voluntary ‘code of practice’, which they drafted in consultation with ASIC. It applies to Afterpay, Brighte, Humm, Klarna, Latitude, Openpay, Payright and Zip at this stage.
The code sets out the minimum standards these companies need to meet, including a cap on late fees, credit checks being required on transactions of more than $2,000, and a minimum age of 18 years for customers to be able to use the services. It was introduced in response to a Senate inquiry that called for greater safeguards for customers via self-regulation.
BNPL companies have so far managed to side-step much of the government regulation that applies to more traditional forms of credit, such as credit cards and personal loans. BNPL services are not currently subject to the National Credit Code, for example.
Do buy now pay later providers do a credit check?
Under the voluntary code of practice, BNPL providers will be required to perform a credit check or similar evaluation on new customers who request transactions of more than $2,000, using their income and expenses data or by checking a credit file. Spend limits above $15,000 must check both these sources. Spend limits of $2,000 or less (or $3,000 for existing customers) don’t require a credit check using external data, but other checks will be necessary, such as ensuring the customer can afford to make the first payment up front and not allowing more purchases if you miss a payment.
It’s worth also noting that your credit score may be affected in other ways if you use these services, according to ASIC. This is because if you take on more credit than you can afford and can’t keep up with repayments, your BNPL provider may report any late payments or defaults to credit reporting agencies.
How are people using buy now pay later?
You might think BNPL would mainly be used to buy relatively low-cost clothes and accessories, but this is not necessarily the case. For instance, depending on the provider you choose, you can use BNPL to pay for more expensive goods and services such as IVF treatment, purchasing glasses or contact lenses, going to the dentist or getting veterinary care for your pet.
Almost half of Australians (48%) surveyed for Canstar’s latest Consumer Pulse Report said they would consider using a BNPL service. The top things they’d consider using BNPL for were clothing (22%), furniture and appliances (both 20%), and electronics and Christmas gifts (both 19%). Perhaps surprisingly, 6% of Australians also said they would consider using BNPL to fund dinner and drinks at a pub or restaurant.
Tips for using buy now pay later
If you’ve decided to open a BNPL account, Moneysmart offers the following tips:
- Stick to a limit and aim to have only one BNPL account
- Make sure you budget for BNPL payments, alongside your other bills and expenses
- Consider choosing a provider that will let you link your BNPL account to your debit card, instead of your credit card. That means you’ll be using your own money for repayments and can avoid being charged credit card interest.
If you have difficulty making repayments, most BNPL providers have a support term that you can contact. You might also like to talk to a financial counsellor. They offer a free and confidential service. You can call the National Debt Helpline on 1800 007 007.
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Last updated: 17/03/2022
About Tamika Seeto
Tamika covers banking and general insurance for Canstar. She joined the team after completing a Bachelor of Journalism and Bachelor of Laws (Honours) at QUT. Her work is regularly referenced by major publishers, such as The Guardian, ABC, Yahoo Finance, The Motley Fool and The Conversation.
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This content was reviewed by Sub-Editor Tom Letts as part of our fact-checking process.