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You've probably come across payment options such as AfterPay, Klarna and PayPal Pay in 4 when checking out online.
These are all Buy Now, Pay Later (BNPL) services, and they’re changing how we shop.
What is Buy Now, Pay Later?
BNPL is exactly what it sounds like – it’s a payment option that lets you buy something immediately and pay it off in instalments. For example, if you pay for something with Afterpay, your total cost will be divided into four instalments to be paid every two weeks.
Buy Now, Pay Later regulations
BNPL services are now regulated in Australia under responsible lending obligations, just like credit cards and personal loans. That means providers must assess your financial situation before approving you. If you already have a BNPL account, it’s considered a credit facility, and lenders may view it the same way they would a credit card when assessing applications.
Pros and cons
You may hear some people say to avoid BNPL services, while others swear by them. Here are some of the pros and cons.
Pros
Cons
YesFlexibility on big purchases
Instead of spending a large amount in one go, with Buy Now, Pay Later services, you can break the payment down into smaller chunks over time.
❌ Credit score impact
Buy Now, Pay Later providers can report any late or missed payments to credit reporting bodies, which can harm your credit score.
YesHelps with budgeting
If you have a lot of expenses coming up in a short period of time, Buy Now Pay Later can spread the expenses out which can fit better into your weekly budget.
❌ Needs to be monitored
It can be easy to forget about a Buy Now, Pay Later payment especially if it was made weeks ago. You need to keep a track of the outstanding payment dates in your budget to avoid missing any upcoming payments.
YesInterest free repayment options
Most Buy Now, Pay Later services have 0% interest on making repayments, which makes them a more cost-effective alternative to having a personal loan. Always check first with the BNPL provider.
❌ Late fees
If you miss a payment due date, you can be charged late fees by the provider. Many Buy Now, Pay Later providers have no grace period for late payments.
YesConvenience
Online retailers have made it easier to pay with Buy Now, Pay Later providers. Some Buy Now, Pay Later providers are now integrated into the different payment options available online.
❌ Risk of overspending
You can fall into the trap of spending what you don’t have as you don’t need to put up the whole cost upfront.
The bottom line
Buy Now, Pay Later is a flexible way of managing your payments however it isn’t risk-free. Buy Now, Pay Later isn’t suitable for everyone. If you are considering a Buy Now, Pay Later service, make sure you weigh the pros and cons and read the fine print.
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The information provided on this website does not take into account your objectives, financial situation or needs. Therefore, you should firstly consider the appropriateness of this information and refer to the Terms and Conditions or the relevant Product Disclosure Statement (PDS) before acquiring a product. These documents are available at our branches or by contacting us on 1300 654 822.
