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Payments giant PayPal to enter the buy now, pay later sector - how does it stack up?

Payments giant PayPal to enter the buy now, pay later sector - how does it stack up?

Competition in the buy now, pay later sector has just stepped up a notch with PayPal announcing it’s joining the club.

PayPal’s ‘Pay in 4’ option will go live in June and will be automatically available to its 9+ million customers in the PayPal wallet.

Retailers will also be able to integrate the buy now, pay later (BNPL) option onto their own websites.

But how does PayPal’s option stack up against the existing BNPL providers?

PayPal 'Pay in 4'Afterpay
Interest chargedNoNo
Account feesNoneNone
Max credit limitDetermined on case by case basis$2,000
Max individual purchase $50 - $1,500Up to $1,500
Where you can use itAnywhere PayPal is acceptedAffiliated retailers
Payment plan4 instalments over 6 weeks4 instalments over 6 weeks for new customers
Late fees$10 for purchases under $125. $10-$30 for purchases over $125$10 per missed payment, plus $7 if not paid within 7 days. Late fees capped at 25% of the purchase price or $68, whichever is lower

RateCity.com.au research director, Sally Tindall, said: “PayPal’s ‘Pay in 4’ service might have lower late fees than some of the other providers, but that doesn’t mean customers will be immune from getting into trouble.

“It’s not just late fees getting people into trouble. One of the biggest issues is that some people end up overspending using these platforms leaving them with not enough money to pay for essentials.

“The repayments on these platforms typically come out automatically and can therefore blow a hole in people’s budgets.” she said.

Unlike Afterpay, PayPal has not set a standard limit on how much people will be able to borrow, saying it will decide this on a case-by-case basis. “ASIC’s most recent report into the sector found people getting into trouble using buy now, pay later were more likely to have more than one account.

“Another major player in the market could give some people the opportunity to get into more debt unless proper checks and balances are in place. 

“It’s not yet clear how PayPal will assess their existing customers’ ability to repay. The devil could be in the detail.

“We believe all buy now, pay later providers should assess a customers’ ability to repay not just the debt they’re signing up to but all existing debts they might have.

“With over 9 million existing customers to tap into, PayPal’s new buy now, pay later function is likely to give Afterpay and Zip a run for their money.

“The buy now, pay later space is becoming increasingly crowded, particularly with the recent release of CBA and NAB’s no interest credit cards, which make up around 30 per cent of each banks’ new credit card applications.

“While the appetite for buy now, pay later is still growing in Australia, it’s hard to see all of these platforms sticking around,” she said.

Paypal has told RateCity.com.au it is still considering if it will sign up to the newly established buy now, pay later Code of Practice.

Key BNPL services available in Australia – excludes personal loan payments plans.

BNPL providerWhere you can use itPayment scheduleBorrowing limitAccount feesLate fees
PayPal

“Pay in 4”

Anywhere PayPal is accepted4 instalments over 6 weeks.Single purchases up to $1,500. Total amount varies per person.No interest or monthly fees.$10 per late payment, capped at $30.
AfterpayAffiliated retailers4 instalments over 6 weeks

(8 wks for customers who regularly pay on time).

$2,000

No interest or monthly fees.$10 per late repayment and an additional $7 if you don’t pay in 7 days. Max fee 25% or $68 whichever is lower.
humm (Little Things)Use at affiliated retailers as well a majority of BPay billers.5  or 10 weekly or fortnightly instalments.

$2,000

$8 monthly fee charged on payment plans 5 months or greater.$6 for each late payment.
Zip PayAnywhere + BPAYFlexible repayment schedule (weekly, fortnightly or monthly) provided you pay a min $40 / mth.

$1,500

$6/mth if you have money owing.Late payment fee of $5 after 21 days of not paying the minimum.
Klarna Use in most stores via the Klarna app (excludes supermarkets).Pay in 4 fortnightly instalments. Can extend for 10 days as a one time courtesy.

$1,000

Up to $7  fee to extend for 2 weeks (dependent on purchase price).$3 - $15, depending on purchase price, per late payment. Max fee is $45. A grace period is provided before the late fee is charged.

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Fact Checked -

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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Learn more about credit cards

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do you pay off credit cards?

The best way to pay off a credit card bill is to set a realistic spending budget and stick to it. Each month, you’ll get a credit card statement detailing how much you owe and how long it will take to pay off the balance by making minimum repayments. If you only make the minimum repayments, it will take you years to pay off your outstanding balance and add extra costs in interest charges. To avoid any extra charges, you should pay the entire bill. 

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How does the Commonwealth Bank credit card instalment plan work?

Commonwealth Bank credit card instalment plans allow you to structure the schedule for repaying your outstanding credit card balances. So, rather than pay the entire amount on the due date, you’ll pay a fixed amount on every due date for a particular period.

You can choose from three types of plans. The first is to pay-off a one-time large purchase exceeding $100 made during the previous 14 days. The second plan is to pay off the credit card balance (excluding cash advance, balance transfers, and existing instalment plans) of $600 or more in whole or part over a predetermined period. The last plan allows you to pay off the cash advance balance of $600 or higher in part or fully, over a certain period.

You can break down large purchases into affordable instalments over some time that you specify. Additionally, you enjoy the flexibility to cancel or prepay the plan before its last instalment. You can simultaneously have ten active plans without additional credit checks on all eligible cards.

Once you select the eligible purchase or balance and the desired repayment term, the monthly instalment and due date are shown in the next statement, which includes the new payment and the summary of the plan’s progress. In case you miss a payment, the plan isn’t cancelled, but an unpaid instalment is re-transferred to the applicable balance, and you’ll be charged the standard rate. The plan can be revoked at any time, and the outstanding amount is added to the cash advance or purchase balance as applicable.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How does the Citibank credit card instalment plan work?

The Citibank credit card instalment plan is designed to help you make repayments on purchases over a predetermined period of time.It is similar to buy now, pay later services, and you can choose a plan that suits your financial situation.

You can set up a fixed payment option for up to five recent purchases each worth at least $500. Alternatively, there’s a cash-out option, where the issuer pays you between $500 and the maximum credit limit via a cheque, which can then be repaid in fixed instalments over your chosen duration.

Can we pay stamp duty by credit card?

Different states also have different rules about whether you can pay stamp duty with a credit card. Check the payment options for stamp duty on your local state revenue office website.

Some allow payments only from a savings or chequing account, whereas others allow payment through BPAY using your credit card. Also read the fine print to see if BPAY payments on your credit card are considered cash advances, as this could attract a higher interest rate.

What is the American Express credit card insurance coverage?

Several American Express credit cards, including the Gold, Platinum and Green cards, come with international and domestic travel insurance, shopping and purchase protection and smartphone screen insurance. All you have to do to activate your American Express credit card insurance cover is use it to pay for eligible purchases, travel, and a smartphone.

The complimentary travel insurance requires you to be less than 80 years old with no pre-existing diseases and your travel must begin and end in Australia.

To make an American Express credit card insurance claim, you’ll need to lodge your request with Chubb Claim Centre within 30 days. Submit the form along with supporting documents like medical reports, original invoices and receipts. You can also contact Chubb on 1800 139 149 or file a claim via the Chubb website.

Who is eligible for Bankwest credit card insurance

Bankwest offers complimentary overseas travel insurance to its Gold MasterCard, Platinum MasterCard and World MasterCard cardholders. Eligible Gold and Platinum MasterCard customers are covered for up to 31 consecutive days of travel, while the World MasterCard holders are covered for six successive months.

To receive the complimentary Bankwest credit card insurance, cardholders need to:

  • Be under 80 years old
  • Be travelling to a foreign destination
  • Not have a cancelled or suspended card.


The complimentary insurance is also available to spouses and children if they travel with you for the entire period. The level of cover depends on the type of card and its  credit limit. Some of the standard types of cover include:

  • Overseas emergency medical assistance
  • Personal liability
  • Accidental demise
  • Baggage and personal goods.


It’s important to remember that pre-existing conditions are not covered by the complimentary Bankwest credit card insurance. Other terms and conditions also apply. 

If you are an eligible cardholder and need to make a claim, it can either be done online or by calling +612 8907 5615. 

How do I increase my Virgin credit card limit?

If you’re a Virgin Money cardholder and you’re looking at increasing your credit card limit, the first step is to get in touch with Virgin’s credit team on 13 37 39. 

Once you request a Virgin Money credit card limit increase, the lender will do an assessment of your current financial position to make sure you can repay the credit. Virgin Money will typically take 7 to 10 working days to complete this process.

Virgin Money has strict terms around credit increases. To be eligible, you must have opened your account no less than nine months before making the application. Also, at least six months must have passed since your last credit limit increase. The maximum increase you can expect will be 50 per cent of your existing credit limit.

How does ANZ increase my credit card limit?

If you’re the primary cardholder on an ANZ credit card, you can increase your credit limit by logging into your credit card account and choosing the “Increase your credit limit” option. You can also submit an ANZ credit card limit increase application form by visiting any ANZ branch or by mail or fax. When completing the form, it's important to remember to specify how much you want the limit increased. You can estimate this by first calculating the amount of credit card debt you can afford to repay based on your income and expenses, and then declaring that in your application. 

Irrespective of whether you’re completing your ANZ credit card limit increase application online or in print, you’ll need to provide updated employment information, income, and expenses, which the company will have to verify. You'll also need to authorise ANZ’s access to your credit history, as your current credit score and recent credit history tell the company about your financial responsibility, and whether or not you'll be able to repay the additional debt you’re applying for. 

In some cases, ANZ may ask you for additional information, or the agent processing the application may reach out to you after your application is received. After verifying your credit score as well as your personal and financial information, however, ANZ may approve a credit card limit increase proportionate to your repaying ability, though it may not be the same as the increase you requested.