Buy now pay later

How "Buy Now Pay Later" compares to credit cards

- Last updated on 01 Mar 2021

To help you make a choice about Buy Now Pay Later, here are some options you can consider. These are some examples of what’s available in the marketplace from selected providers.

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Use at affiliated retailers. Primarily non-essential items

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Anywhere Mastercard is accepted. Can be used for essential and non-essential items

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Use to pay bills (primarily utility bills)

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Use at affiliated retailers as well a majority of BPay billers. Primarily non-essential items.

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Use in most stores via the Klarna app (excludes supermarkets)

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Use at affiliated retailers. Primarily non-essential items.

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Zip Pay

Use anywhere

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Use at affiliated retailers. Some retailers require a credit card

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Use at affiliated retailers. Primarily non-essential items

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Use at affiliated retailers. Primarily non-essential items

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What are buy-now-pay-later services?

Buy now, pay later (BNPL) services are apps or online platforms that allow you to purchase something today that you then pay back in smaller segments. Think old-school layby meets the digital world - except you don't have to wait to pay in full to get your purchase. 

BNPL services were created to not only help customers on tight budgets take home something today that they then pay in the future, but also help make repaying a purchase more manageable than using a credit card.

What you can buy through a BNPL platform is determined by its participating retailers and can range from smaller items like clothing to big-ticket items like furniture and appliances. However, spending caps are typically in place to help reduce some risk to the customer, ranging from a few hundred dollars to tens of thousands on some BNPL platforms.

As credit cards fall out of favour – particularly for millennials and Gen Z – due to their high interest rates and hard-to-meet eligibility criteria, the popularity of BNPL services have skyrocketed in recent years.

Here is everything you need to know if you’re considering joining up with a BNPL service.

Australia's "Buy Now, Pay Later" options

Afterpay BrightePay
Bundll Deferit
Fupay Humm (Little Thibngs)
Klarna LatitudePay
Laybuy OpenPay
Payright PayItLater
Splitit ZipPay

Are there hidden costs?

BNPL services split up your repayments into even segments. The biggest advantage of these platforms is that they do not charge interest on your purchases. But they do charge late fees on missed payments. BNPL late payment fees differ for each platform, which are elaborated on further on this page.  

There are some other costs that your bank may sting you with that you should consider before signing up with a BNPL service: 

  • Overdraft bank fees

If the BNPL service tries to withdraw money from your account for your latest repayment, but you have insufficient funds, you may be charged an overdraft fee. Luckily, BNPL services should send you a reminder before your next direct debit so you can make sure you have money available.  

  • Credit card interest

While the advantage of BNPL services is that they don’t charge you interest, your credit card still can. If you select your credit card to be linked to your BNPL account and are unable to pay off your credit card balance on time, you will be charged interest on this outstanding amount.

Afterpay: friend or foe?

Should you use BNPL services or a credit card?

Before you make a decision between using a BNPL service or taking out a credit card, it’s worth considering the advantages and disadvantages to choosing one over the other.

Benefits of BNPL over credit cards:

  • No interest. The biggest advantage of BNPL over credit cards is that they do not charge you interest on your outstanding balances. The most significant costs you may face are late payment fees or dishonoured payment fees from your own bank. However, if you connect your credit card to your BNPL service, you may be charged interest by your provider.
  • Simple application. Compared to jumping through eligibility hoops with a credit card, applying for BNPL services can be as simple as downloading the app. You will still need to meet the BNPL eligibility criteria, like being over 18, but this is generally much easier than with a credit card.  
  • No credit check. Unlike a credit card, applying for a BNPL service does not require a credit check. If you have poor or no credit history, this may be a handy benefit. 

Benefits of credit cards over BNPL:

  • Perks and rewards. BNPL services are simply a means to purchasing items with zero-interest repayment plans. If you’re looking for perks, like hotel stays and rental car insurance, or rewards programs typically reserved to credit cards, you’re out of luck.
  • Variety of choice. Credit cards simply offer a greater variety of choice in the type of products offered for a range of different customers. For example, if you’re an avid traveller, there are credit cards designed to better suit you in terms of reduced overseas costs and complimentary insurance.
  • Build credit history. If you are paying your credit card in full each statement period, this may help to build your credit history and potentially boost your credit score. 

If you would like more information on credit cards, and what type of credit card may suit your spending profile, please read out RateCity Credit Card Guide.

How to avoid getting into trouble using BNPL platforms:

A 2020 ASIC report into the BNPL industry over a 12-month period found:

  • 21% of buy now, pay later (BNPL) users surveyed missed a payment.
  • 20% of BNPL users surveyed cut back or went without essentials, including meals, as a result of overspending on these platforms.
  • 15% of BNPL users surveyed had taken out additional loans to make ends meet.
  • 1 in 5 users surveyed missed or were late paying other bills to make BNPL repayments. Of these:
    • 44% missed paying household bills
    • 32% missed credit card repayments
    • 22% missed mortgage repayments.

While buy now, pay later platforms may seem like just a means to make purchases, you still need to review the potential risks involved as if it was any other financial product.

Luckily, there are a few things you can do to avoid getting into trouble with your chosen BNPL platform: 

  1. Read all the terms and conditions and familiarise yourself with any potential fees.
  2. Set strict spending limits that you can actually repay based on your income.
  3. Consider only using one platform and making one purchase with one repayment plan at a time.
  4. Avoid impulse spending by sitting on purchases for at least 24 hours.
  5. If you get into trouble, immediately reach out for help. Each platform should have a hardship policy or some form of financial support available to help you.

Learn about each buy now, pay later platform

About Afterpay

Launched in 2014, Afterpay is by far the most well-known BNPL service. Afterpay breaks down a purchase into four equal instalments to be paid every fortnight. You won’t be charged interest on your repayments, but you can incur late fees if you miss a scheduled payment. Account holders must be 18 years or older.

How Afterpay works

Instead of making one lump sum upfront payment, Afterpay splits your repayments into four instalments. One instalment is required at checkout, then the remainder every fortnight. You can make repayments any time before your due date. 

The bank account or credit card you nominate for your account will be charged at each payment due date. You’ll also receive reminders about when your repayments are due so you can ensure there’s funds available for direct debit.

For example, a $200 dress would then become four instalments of $50 to be paid over six weeks (as long as you don’t miss a payment).

How to sign up

Affiliated stores

Check Afterpay’s website for a full list of affiliated stores.

Afterpay fees 

  • Initial $10 late fee, and further $7 if payment remains unpaid 7 days after due date.
  • Purchases below $40 – maximum one $10 late fee applied per order.
  • Purchases $40+ - late fees capped at 25% of original order value, or $68, whichever is less. 

About BrightePay

Ever dreamed of transforming your home into a more sustainable property, but struggled with the upfront costs of solar energy installation? This is where BrightePay comes in. It allows for part payments of home solar and battery, as well as internal and external amendments to your home to improve your carbon footprint. 

How BrightePay works

BrightePay offers 0 per cent payment plans on funds between $1,000 - $30,000 towards your sustainable renovations. Payments are made fortnightly between a chosen term of 6 months - 60 months. You can use the BrightePay app to track your repayments.  

How to sign up

Affiliated stores

Check BrightePay’s website for a full list of affiliated stores.

BrightePay fees 

  • $1.50 account keeping fee, including fortnightly repayments.
  • $4.99 late payment fee if you miss a repayment. Late fees capped at $49.90 per calendar year. 

About Bundll

Bundll allows customers to make buy now, pay later purchases just about anywhere Mastercard is accepted. Unlike other specialty platforms, Bundll is for everyday transactions, big or small, as long as the location accepts Mastercard. 

How Bundll works

From groceries to train tickets, you can use Bundll to make purchases up to $1,000, and are offered two weeks interest free to make payments. Once the account is activated and Bundll is added to your digital wallet, it can be used when shopping online and instore. 

Keep in mind that it has a shorter payment window than other buy now, pay later platforms of two weeks, but this may be extended up to 12 weeks at a cost. A 12-week payment plan is also referred to as a ‘superbundll’ and may afford the customer an additional credit limit of $3,000 if activated. 

How to sign up

Affiliated stores

Bundll is accepted anywhere Mastercard is. 

Bundll fees 

  • 2-week payment extension costs $5. A 12-week payment plan costs 5% of outstanding purchase amount.
  • $10 late payment fee may apply. Account may be suspended for repeat late payments. 

About Deferit

Deferit is a buy now, pay later platform designed to help Aussies struggling with their bills (mainly utilities bills) get a little breathing room for due payments. Deferit pays your outstanding bill and then the customer pays this back in four fortnightly, interest-free instalments.

How Deferit works

Once you create a Deferit account and are approved, you can begin uploading your outstanding bills. You can upload up to $2,000 worth of outstanding bills and will be charged a monthly fee of $5.99 for this service. However, if you have no balance due you will not be charged this fee. Your repayments are to be made in four fortnightly installments.

How to sign up

Affiliated stores

Check Deferit’s website for a full list of affiliated stores.

Deferit fees 

  • $5.99 monthly service fee – only when balance is outstanding.
  • Card payments include 1.5% + 20c fee. 

About Fupay

Fupay is a buy now, pay later platform that allows customers access to cash for just about anything, including food, rent and bills. You can apply for up to $200 deposited directly into your bank account, pay a bill up to $500 through the app or tap and pay instore using a ‘Fu virtual card’. 

How Fupay works

Fupay offers a few services, including allowing customers access to cash and help repaying bills. Customers need to be over the age of 18 and earn a regular income of at least $300 a week. There is a one-off setup fee of $5. Fupay customers then can make 8 weekly personalised repayments on any purchases made. 

How to sign up

Affiliated stores

Check Fupay’s website for a full list of affiliated stores.

Fupay fees 

  • Initial $5 signup fee.

About Hummpay

Hummpay is a BNPL service that allows users to split up payments over time on big or small purchases. Small purchases are defined as up to $2,000, which can be repaid fortnightly in 5 or 10 increments. Big purchases are defined as up to $30,000 and you’re given up to 60 months to pay this off, depending on the store and item you buy.

How it works

You apply for funds up to $2,000. Purchases you make are then repaid in five or ten segments, weekly or fortnightly. Similar to how a credit limit works on a credit card, once you’ve repaid your purchases, your ‘balance’ is then freed up and you can spend again.

If you’re looking to buy a bigger-ticket item, Hummpay also offers pre-approval for purchases up to $10,000. You can also apply instore for finance up to $30,000 (depending on what you buy and where you shop). These bigger ticket items are then repaid over 6 months all the way up to 60 months.

How to sign up

  • Website sign up
  • App sign up
  • In-store sign up

Affiliated stores

Check Hummpay’s website for a full list of affiliated stores.

Hummpay fees

  • $8 monthly fee if paying 10x fortnightly for purchase under $2k.
  • $8 monthly fee if paying over 6-60 months for purchases up to $30k.
  • Establishment fee of $35-90 for purchases up to $30k.
  • Repeat purchase fee of $22 for purchases up to $30k.
  • Late payment fee of $6 across all payment models.

About Klarna

A Swedish platform, Klarna allows Australian customers to make purchases with a number of affiliated retailers and repay this back in four instalments. Customers may also be able to earn rewards on purchases, similar to rewards programs with credit cards and Flybuys rewards. 

How Klarna works

Customers use Klarna to make purchases up to $1,000 with affiliated retailers, such as ASOS and H&M. The outstanding balance must then be paid in four fortnightly instalments and may be extended up to 10 days as a one-time courtesy if needed. 

How to sign up

Affiliated stores

Check Klarna’s website for a full list of affiliated stores.

Klarna fees 

  • Up to $7 fee may be charged if extension on repayments requested.
  • Late payment fee of $3-15 per purchase, depending on purchase price. Maximum fee is $45. 

About LatitudePay

LatitudePay is a BNPL service from Latitude Financial, an Australian financial services company situated in Australia, as well as New Zealand under the name ‘Gem Finance’. It offers customers the ability to purchase items up to $1,000 with repayment plans over 10 weeks. It is commonly found in popular Aussie retailers like Harvey Norman and The Good Guys.

How it works

You apply for a spending limit up to $1,000. Purchases you make are repaid in ten weekly segments, with zero interest charged. LatitudePay allows customers to login to see their shopping history, change payment days, add or change cards and even pay off the outstanding balance early. A late payment fee of $10 will be charged on any missed payments, but LatitudePay do send out reminders to help customers to stay on track with their repayments.

How to sign up

  • Website sign up
  • App sign up
  • In-store sign up

Affiliated stores

Check LatitudePay’s website for a full list of affiliated stores.

LatitudePay fees

  • $10 late payment fee

About Laybuy

Laybuy allows customers to shop with affiliated retailers and make repayments on purchases over six weeks of instalments.

How Laybuy works

Once a customer joins with Laybuy they will be able to shop with their affiliated retailers, including boohoo and Supre. Repayments are made over six weeks, and a $10 late payment fee per purchase may be charged, plus an additional $10 if you don’t pay within seven days. 

How to sign up

  • Website sign up
  • App sign up
  • Affiliated stores

Check Laybuy’s website for a full list of affiliated stores.

Laybuy fees 

  • Initial $10 late fee, and further $10 if payment remains unpaid 7 days after due date.

About OpenPay

OpenPay allows customers to use its platform to purchase items with its affiliated partners, including dental and automotive, and make part payments on said purchases over 1 – 24 months. Unlike other buy now, pay later platforms, OpenPay extends the repayment window up to two years for bigger purchases. 

How OpenPay works

Customers sign up to OpenPay via website or app and are then able to shop with its affiliated partners, most uniquely including dental and some trades and services. 

Unlike other platforms, customers aren’t limited to a few weeks for repayments, but can request up to two years for bigger purchases – up to $17,500. An initial payment is required at the time of purchase, typically around 20 per cent. 

How to sign up

Affiliated stores

Check OpenPay’s website for a full list of affiliated stores.

OpenPay fees 

  • Late payment fee of $9.50. Fees may depend on customers specific payment plans.

About Payright

Payright is an Australia-based buy now, pay later platform geared to helping customers looking to purchase big ticket items rather than smaller, impulse-driven shopping. Customers can make flexible repayments on purchases made with Payright’s affiliated stores, from plumbers to photographers and beauticians. 

How Payright works

Customers who join with Payright can make fortnightly or monthly repayments on their purchases on terms up to 36 months. Purchases up to $10,000 are available, and customers can access these funds for a range of bigger-purchase stores, such as tattoo parlours and mechanics, compared to Afterpay and other online retailers. 

How to sign up

  • Website sign up
  • App sign up
  • Affiliated stores

Check Payright’s website for a full list of affiliated stores.

Payright fees 

  • Establishment fee from $0 to $89.95
  • Monthly account fee of $3.50 (pro rata)
  • $2.95 processing fee, added to each repayment
  • Late fees up to 12.95

About PayItLater

Customers can use PayItLater to make part payments with its affiliated retailers in a range of categories, including fashion, fitness, furniture and electronics. 

How PayItLater works

PayItLater customers are able to make four weekly repayments for purchases up to the value of $1,000. 

How to sign up

Affiliated stores

Check PayItLater’s website for a full list of affiliated stores.

PayItLater fees 

  • Late payment fee of $10, and an additional $10 if payment not made after a week.  

About Splitit

Splitit is a buy now, pay later platform that allows customers to link their credit cards (Visa or Mastercard) to their part-payment purchases. Customers make interest-free monthly payments on set instalment plans, but your credit card provider may still charge interest on your purchases. 

How Splitit works

Customers are able to make purchases with Splitit’s affiliated retailers up to the value of their own credit card limits. While Splitit may not charge interest on these purchases or your repayments, your credit card issuer may still charge interest and/or fees. Choose from a range of repayment terms, from 3 monthly instalments to 24 monthly instalments. 

How to sign up

Affiliated stores

Check Splitit’s website for a full list of affiliated stores.

Splitit fees 

  • Splitit may charge Merchant a $15 fee when transaction or attempt is returned unpaid.

About Zip Pay

Zip Pay is a Sydney-based BNPL service, owned by ASX-listed company, Zip Money. Similar to a credit card, Zip Pay gives users access to credit from $350, $500 or $1,000.

You can choose a weekly, fortnightly or monthly repayment schedule. A $40 minimum payment is expected within the first month.

How it works

Once approved, you’ll be given a credit limit (like a credit card) of $350, $500 or $1,000 to spend interest free. Unlike other BNPL services, this limit can be used to make multiple purchases in a range of stores.

Zip Pay doesn’t charge interest, but it does charge fees on payments not made within their payment cycle. Once a purchase is made, you have anywhere up to 60 days to pay it off, depending on when you made the payment and when you receive your statement. Otherwise, you’ll be charged a $6 fee.

For example, if you made a purchase on the first of the month, you’d have until the end of the following month to pay it off (60 days). If you made a purchase on the last day of the month, you’d have only around 30 days to pay it off.

How to sign up

  • Website sign up
  • App sign up
  • It can link to your Facebook account or your Pay Pal account.

Affiliated stores

Check Zip Pay’s website for a full list of affiliated stores.

Zip Pay fees

  • Monthly $6 fee if there is any balance outstanding
  • $5 late fee for missed payments