How does buy now pay later work in Australia?

Apr 05, 2024

Apart from credit cards and other forms of credit payment, another tool that has become increasingly popular is the BNPL or buy now pay later in Australia. 


The RBA released figures in October 2021 that showed the value of buy now pay later in Australia transactions to be equivalent to 1.7% of all card purchases in the year up till June 2021.

While around AUD 11.5 billion was being processed by buy now pay later providers.

What is buy now pay later?

Buy now pay later services essentially allow customers to make interest-free credit purchases where instead of paying the full value of an item upfront you can pay back in installments.

In BNPL The amount of a product purchased is divided into interest-free installments that customers can pay back across a period of weeks or months.

Buy now pay later services can be used for a variety of products and some professional services as well. Industries, where BNPL is particularly popular, include the fashion and retail sectors.

Other areas where buy now pay later in Australia include vehicle repair, travel, and medical work as well.

How does buy now pay later work?

The buy now pay later payment option comes into effect at the time of checkout, regardless of whether it's done online or in-store. Upon choosing the BNPL option, the customer’s eligibility is checked by the chosen BNPL service provider.

After approval, which usually takes a few seconds, a down payment has to be made by the customer. This down payment usually amounts to a percentage of the total price of the product purchased, say 15%.

The amount that is remaining after the down payment is then divided into interest-free payments that are spread across a specific period of time.


Throughout the process, customers are given upfront, clear information about the amount that they owe and what time they’re due to be paid.

While different buy now pay later companies give different options, you can usually choose to make a payment via bank transfer, or check or you can also allow automated payments to be deducted from your debit or credit card or bank.

Features offered by buy now pay later platforms

A major reason why buy now pay later in Australia is becoming increasingly popular is due to the many features that come with the service. Some of these features include:

1. Varying loan term

Depending on the provider or retailer you choose the loan term you get with BNPL will vary.

Loan terms for purchases of small value can range anywhere from a few weeks up to 6 months while for purchases of larger amounts loan terms can go up to 2 or more years.

2. Variable purchasing power

The purchasing power you get with buy now pay later apps Australia also varies from provider to provider. You can make payments without paying for as much as AUD 30,000 to as little as AUD 35.

3. Repayment frequency

This feature also varies from provider to provider. Payment options for merchants are commonly paid back in 4 installments, whereas the line of credit products generally require repayments made monthly.

4. Paperless process

With the BNPL payment option you can complete the entire payment process without using a single piece of paper. The entire process can be completed online.

5. Wider acceptance

Buy now pay later credit cards are accepted as readily as normal credit cards are and the number of merchants who accept BNPL are only increasing.

6. Convenience

BNPL payment options are also extremely convenient to use because the entire process of application and approval of credit happens online or at the point of purchase, within minutes.

Moreover, line of credit products do not expire after you pay your debt off, unlike a loan; you can reuse the card again whenever required.

What fees do buy now pay later providers charge?

Even though buy now pay later services do not charge interest they do, however, come with their own set of fees and charges.

These costs vary depending on the provider you choose but some common fees that are charged by most buy now pay later providers include:

Late fees

Late fees are charges when you are unable to pay your dues on time or miss a payment for some reason.

Charges associated with buy now pay later late fees per installment missed can be anywhere from AUD 5 to AUD 15. Some providers even put a limit on the chargeable amount.

Monthly fees

Charging a monthly fee, sometimes referred to as an account-keeping fee, is also a common practice amongst providers of buy now pay later in Australia.

This can range anywhere around the AUD 8 mark and for some cases buy now pay later services waive the fee if there is no account balance outstanding.

Establishment fees

There are also BNPL service providers that charge a certain amount at the time of setting up an account. This amount can go up to a limit of AUD 99 per account.

Payment processing fee

BNPL providers can also charge a fee for every transaction made for purchases where up to AUD 3 can be charged for each payment made.

6 best buy now pay later companies in Australia


How it works - Sign up and get instant cash up to AUD 1200 before payday. Also, make flexible repayments with installments across up to 4 pay cycles.

Costs associated - No hidden fees or interest charged. There is a 5% transaction fee that is fixed.

Credit check requirement - No

Zip Pay

How it works - Sign up at the checkout or online for up to AUD 1,000 credit limit. Zip pay credit lines can be used at almost any retailer.

Costs associated - 0% p.a. interest rate. Up to 60 days fee-free, but a monthly fee of AUD 7.95 will apply post this time period if repayment is not done on your purchase in full and will remain as long as you have balance outstanding.

Monthly minimum repayment of AUD 40 is also required.

Credit check requirement - Yes

Zip Money

How it works - Sign up at the checkout or online and receive anywhere between AUD 1,000 and AUD 30,000 line of credit. Can be used at any Zip money retailer.

Costs associated - First 3 months are interest-free. After this 21.90% p.a. rate will apply to the balance outstanding. The monthly fee also applies when you have a balance outstanding. Late fees apply.

Credit check requirement - Yes


How it works - Sign up for Humm via the app or online to use at many stores. Apply for up to AUD 30,000 with terms of up to 60 months.

Costs associated - AUD 8 fee monthly for terms of 5–60 months. AUD 0 monthly fee for terms of 2.5 months or less. Late fees apply.

Credit check requirement - Determined by the amount of the loan.


How it works - Can be selected at checkout, online or in-store. Repay can be done in 4 fortnightly installments equally.

Costs associated - AUD 10 late payment fees is charged and a further AUD 7 if payment not done within next week.

Credit check requirement - No


How it works - Shop in-store or online and pay back in 10 weekly payments.

Costs associated - AUD 0 sign-up fee, no interest charged but there is a late payment fee of AUD 10. For merchants there is a transaction fee.

Credit check requirement - Yes

Corporate credit cards for small businesses with Volopay

With Volopay you get corporate cards with a built-in credit line that also comes with an extremely flexible payment plan.

Use Volopay credit cards to easily manage subscription payments, employee travel costs, and pretty much any business expense you can think of.

These cards are fitted with in-built spend control measures that you can customize to your needs and requirements.

What’s more is that Volopay corporate cards also come with a spend management tool that consolidates, tracks, and processes all your business expenses!

Need a credit card equipped with a complete financial stack?


How many buy now, pay later companies are there in Australia?

Presently, there are six major buy now pay later companies that are active in Australia. These include Beforepay, Zip Pay, Zip Money, Humm, Afterpay, and LatitudePay.

Is buy now, pay later regulated in Australia?

Buy now pay later services are regulated by the Australian Securities and Investments Commission as credit. The commission can use its power of product intervention to resolve market-related issues.

Why is buy now pay later so popular in Australia?

Buy now pay later credit cards have become extremely popular amongst both Australian customers as well as retailers. Consumers who are cash-strapped instantly get their purchases made. They can easily pay this amount off in interest-free regular installments all within a time period of their suiting.