MoneySmart

(ASIC)

What you need to know about buy now pay later services

Buy now pay later payment services allow you to delay payment or pay by installments (often fortnightly) over a period of time. Here we explain how these payment services work, what fees you'll pay and how to avoid getting into financial trouble if you're using these services.

• What is buy now pay later?

• How do these payment services work?

• Are buy now pay later services worth it?

• Managing your buy now pay later payments

• Making a complaint about buy now pay later services

What is buy now pay later?

Buy now pay later services are offered by providers such as:

• Afterpay

• Certegy Ezi-Pay

• zipPay

• Oxipay

• BrightePay

• Openpay.

Buy now pay later services are offered by retailers and service providers so you can buy a product immediately and delay payment. You then pay off the product in instalments over several weeks or, with some high-value purchases, over a longer period of time.

Buy now pay later isn't only offered for low-value purchases, like clothes and beauty products. Solar panels and health services can also be bought using buy now pay later.

How do these payment services work?

Buy now pay later services are offered when you shop online or in-store as another payment option at the time of checkout.

You can apply for and set up a purchase plan through the provider's app or website when shopping online.

If you're shopping in-store, a shop assistant will set up the buy now pay later application on your behalf. The buy now pay later provider will contact you when your application is approved. This is usually a quick process.

You will need to provide your bank or credit card details the first time you use these services so your payments can be deducted. You may also be required to pay either a deposit or the first instalment up-front.

Refunds and returns

If you have a problem with the product or service you've bought, the shop or service provider's returns policy will apply, so contact them first.

Are buy now pay later services worth it?

Buy now pay later services are often advertised as 'interest-free' or '0% interest', but the cost will add up if you can't make the repayments on time.

Here are some things to look out for before using these services.

• Late fees - There's usually a late fee every time you miss a payment or pay late. These fees can add up over time.

• Monthly account-keeping fees - Some of these services charge you a fixed amount for every month you continue to use their service.

• Payment processing fees - You may be required to pay a fee for each payment, on top of your set repayment.

Smart tip: Always check the terms and conditions before you sign up, as they can be different for each buy now pay later service.

Case study: Mai struggles to make ends meet after using buy now pay later services

In the lead-up to Christmas, Mai decided to take advantage of some markdowns by buying a couple of items online.

She found a new pair of designer sneakers worth $150. As Mai was a bit tight on money, she signed up to a buy now pay later service to split her repayments. She then found a hair straightener at a reduced price of $300 at another online store. Mai used a different buy now pay later service to buy the hair straightener and stretch out her repayments.

A fortnight later, Mai discovered that her bank account was overdrawn. She then realised she had not checked before buying the items if she would have enough money in her account to make both repayments.

Mai was not only charged default fees by both buy now pay later providers, but her bank also charged her an overdrawn fee.

Is your credit history or ability to repay checked?

Most buy now pay later providers do not check your ability to make repayments or your credit history. This means you could end up taking on more credit than you can afford and could have trouble making your repayments.

This can affect your credit score as some providers report late payments to credit reporting agencies.

Managing your buy now pay later payments

Stay in control when you use a buy now pay later service by following these tips:

• Plan ahead: Make sure you can afford the full price and that the repayments fit into your budget. Consider any other bills or financial commitments due at the same time as your buy now pay later payments.

• Don't get into debt: 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.

• Don't overcommit: Stick to a limit and aim to have only one buy now pay later at a time.

• Ask for help: If you're having trouble making repayments, contact your provider straight away.

Taking on too much debt?

An ASIC review of the buy now pay later industry found that 1 in 6 users had become overdrawn, delayed other bill payments or borrowed money so they could make their buy now pay later payments.

Making a complaint about buy now pay later services

Most buy now pay later providers have dedicated complaints and hardship services. Contact your provider to discuss your complaint, or if you are having difficulty making repayments.

A free financial counsellor can also help if you're struggling financially.

Using buy now pay later when you shop can be a convenient way to pay for things, but you need to be careful not to overcommit financially or buy more expensive items than you usually would.