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 charged No No
Account fees None None
Max credit limit Determined on case by case basis $2,000
Max individual purchase $50 - $1,500 Up to $1,500
Where you can use it Anywhere PayPal is accepted Affiliated retailers
Payment plan 4 instalments over 6 weeks 4 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 provider Where you can use it Payment schedule Borrowing limit Account fees Late fees  
PayPal

“Pay in 4”

Anywhere PayPal is accepted 4 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.  
Afterpay Affiliated retailers 4 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 Pay Anywhere + BPAY Flexible 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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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 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.

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.

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.

How to increase your HSBC credit card limit

You can opt to increase your HSBC credit card limit in multiple ways. 

The easiest way to change your HSBC credit card limit is through online banking. Log on to your account and click on ‘Manage your account’. Then, click on ‘My Cards’ and choose to change your credit card limit. Simply complete the HSBC credit card limit increase form and click on ‘Submit’. 

You can also request to increase your credit card limit by calling HSBC’s customer service hotline on 1300 303 168. 

Lastly, you can visit any HSBC branch to apply to lift your card limit. 

If you are facing challenges while trying to complete an HSBC credit card credit limit increase online, you can chat with a representative using internet banking. Click on the ‘Need Help’ button on the right of the dashboard and open the chat window to speak with the customer service officer. 

How does the ANZ credit card instalment plan work?

While you usually need to settle all or part of your credit card dues at the end of your statement period, some credit cards afford you the option of setting up instalment plans. This allows you to settle your credit card debt at a pace that's more convenient for you, paying a fixed amount over a fixed period, thus making it easier to budget your repayments every month.

With the ANZ credit card instalment plan, you can set up a structured repayment schedule for part or all of your balance, or even for specific purchases over a certain value.

Some of the benefits of instalment repayment include: 

  • Structured repayments: You’ll have a fixed sum to pay each month.
  • Easier to budget: A fixed repayment sum makes it easier to make your monthly budget.
  • Account benefits: You might also get benefits such as discounted interest rates or debt-tracking tools.

There are disadvantages of opting for instalment repayment, however, and they include:

  • Less flexibility: You will not be able to pay a smaller amount once you set an instalment plan.
  • Different interest charges: In case the instalment plan only covers part of the balance, different interest charges could apply, making it challenging to budget.
  • Additional fees: You might have to pay fees or penalty charges in case of missed payments.

How to increase your Bendigo Bank credit card limit?

As a Bendigo Bank credit cardholder, you can avail a minimum limit of $500, but if you use your card regularly, you may want to consider increasing it. To increase your Bendigo Bank credit card limit, you can contact the bank’s credit card team on 1300 236 344 and talk to the bank directly.

You can also apply for a credit card limit increase through online banking, by logging into Bendigo Bank web portal or through the app on your phone or tablet. Once you’ve successfully logged in, you'll want  to send a secure message to Bendigo Bank asking them to increase your credit card limit. 

If you cannot access the online portal or the app, you can also apply to increase your credit card limit through the online enquiry form. Simply add relevant information in the required fields and click ‘Submit’. Once you have completed the application, Bendigo Bank should verify your details and analyse your current financial standing. Based on this assessment, the bank will either accept your application to increase your credit card limit or deny it. 

How to increase your Heritage credit card limit?

Heritage credit card holders can increase their card limits, and typically without any hassles. There are two limits applied to your credit card: your account transfer limit and your credit card limit, each of which has a separate limit.

To increase your Heritage credit card limit, you can contact Heritage on 13 14 22. Unfortunately, you cannot opt to increase your credit card limit online due to security reasons. 

You can, however, request to increase your daily account transfer limit and BPAY® to up to $40,000 per day easily through Heritage Online. To do this,  you'll need to first ensure that your credit card limit is more than $40,000. If it is lower, you’ll need to first ask Heritage for an increase in your credit card limit. 

  • It’s important to note that once you change your credit limit, the daily periodic rate and corresponding annual percentage rate will change as well. This is likely to come into effect on the first day of each billing cycle that begins in March, June, September, and December. The effect of an increase in the annual percentage rate and the daily periodic rate will lead to an increased amount of interest you will have to cover in your monthly payment.