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:
- Afterpay
- Brighte
- Humm
- Klarna
- LatitudePay
- Payright
- Plenti
- 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 are 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 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 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
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
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.
What to do if you get into trouble
Most buy now pay later providers have complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments.
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.
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.