Buy Now, Pay Later Services: A Comparison for Australian Shoppers

Buy Now, Pay Later Services: A Comparison for Australian Shoppers

Buy Now, Pay Later (BNPL) services have exploded in popularity in Australia, offering a convenient way to spread the cost of purchases. But with so many options available, it's crucial to understand the differences between them before signing up. This article provides an objective comparison of some of the most popular BNPL services in Australia, including Afterpay, Zip Pay, and Humm, to help you make an informed decision.

Afterpay vs. Zip Pay vs. Humm

These three BNPL providers are among the most widely used in Australia, but they cater to slightly different needs and offer varying terms.

Afterpay: Focuses primarily on smaller, everyday purchases. It's known for its simple structure and widespread acceptance among retailers.
Zip Pay: Offers more flexibility with higher spending limits and the option to consolidate multiple purchases into a single monthly bill.
Humm: Caters to both smaller and larger purchases, with options for both short-term and longer-term repayment plans. It's often used for bigger-ticket items like furniture or appliances.

Here's a more detailed breakdown:

| Feature | Afterpay | Zip Pay | Humm |
| ----------------- | --------------------------------------- | ---------------------------------------- | ------------------------------------------ |
| Purchase Range | Typically up to $2,000 | Up to $1,000 (can vary) | From $1 to $30,000 (depending on plan) |
| Repayment Terms | 4 fortnightly instalments | Minimum monthly repayment (usually $40) | Fortnightly or monthly, depending on plan |
| Account Fees | Late fees if payments are missed | Monthly account fee if balance is owing | Establishment fees and monthly fees may apply |
| Interest | None | None | None (for short-term plans) |
| Credit Check | Generally no credit check for initial use | May conduct a credit check for higher limits | May conduct a credit check |
| Retailer Network | Extensive | Extensive | Growing |

When choosing a provider, consider what Cybershopping offers and how it aligns with your needs. Think about the types of purchases you typically make and the repayment flexibility you require.

Afterpay Details

Afterpay's popularity stems from its straightforward approach. You pay 25% of the purchase price upfront, followed by three further instalments every two weeks. Late fees apply if you miss a payment, but there are no interest charges. It is ideal for smaller purchases that you can comfortably repay within a short timeframe. Many retailers, both online and in-store, accept Afterpay.

Zip Pay Details

Zip Pay provides a revolving line of credit, allowing you to make purchases up to your approved limit. You'll receive a monthly statement and need to make at least the minimum repayment. A monthly account fee applies if you have an outstanding balance. Zip Pay offers more flexibility than Afterpay, but it's important to manage your spending carefully to avoid accumulating debt and fees.

Humm Details

Humm distinguishes itself by offering plans for both "Little things" (smaller purchases) and "Big things" (larger purchases). "Little things" plans generally have shorter repayment terms and no interest, while "Big things" plans may involve longer repayment periods and potentially incur interest or establishment fees. Humm is a good option if you need to finance larger purchases over a longer period.

Interest Rates and Fees

One of the main attractions of BNPL services is the absence of traditional interest charges. However, it's crucial to be aware of the fees that can apply.

Late Fees: Most BNPL providers charge late fees if you miss a payment. These fees can vary, so check the terms and conditions carefully.
Account Fees: Some providers, like Zip Pay, charge a monthly account fee if you have an outstanding balance.
Establishment Fees: Humm may charge establishment fees for certain plans, particularly those for larger purchases.
Processing Fees: While less common, some BNPL services may charge processing fees for certain transactions.

Always read the fine print to understand the full cost of using a BNPL service. While the lack of interest may seem appealing, late fees and other charges can quickly add up if you're not careful with your repayments. Understanding these costs is key to responsible usage. You can also find more information on frequently asked questions.

Credit Checks and Impact on Credit Score

The impact of BNPL services on your credit score is a common concern. Generally:

Afterpay: Typically does not conduct credit checks for initial use, so it usually won't directly impact your credit score. However, late payments may be reported to credit bureaus in some cases, which could negatively affect your score.
Zip Pay: May conduct a credit check when you apply for a higher spending limit. This could leave a record on your credit file. Responsible use of Zip Pay can potentially help build a positive credit history, but late payments can harm your score.
Humm: May conduct a credit check, particularly for larger purchases or longer-term plans. As with Zip Pay, responsible use can potentially benefit your credit score, while late payments can have a negative impact.

It's important to note that even if a BNPL service doesn't conduct a credit check upfront, consistently missing payments can still negatively impact your credit score if the debt is referred to a collection agency or reported to a credit bureau. Always prioritise making your repayments on time.

Spending Limits and Repayment Schedules

BNPL services offer varying spending limits and repayment schedules. Understanding these differences is crucial for choosing the right provider for your needs.

Spending Limits: Afterpay typically has lower spending limits than Zip Pay or Humm. Zip Pay's spending limit can vary depending on your creditworthiness. Humm offers the highest potential spending limits, particularly for its "Big things" plans.
Repayment Schedules: Afterpay requires repayments in four fortnightly instalments. Zip Pay requires a minimum monthly repayment, giving you more flexibility. Humm offers both fortnightly and monthly repayment options, depending on the plan.

Consider your budget and repayment capacity when choosing a BNPL service. If you prefer a structured repayment schedule with fixed instalments, Afterpay might be a good option. If you need more flexibility, Zip Pay or Humm could be more suitable. Always ensure you can comfortably afford the repayments before making a purchase.

Pros and Cons of Using BNPL

Like any financial product, BNPL services have both advantages and disadvantages.

Pros:

Convenience: BNPL services offer a convenient way to spread the cost of purchases, making them more manageable.
No Interest (Usually): Most BNPL services don't charge interest, making them potentially cheaper than credit cards (as long as you avoid late fees).
Accessibility: BNPL services can be easier to access than traditional credit, particularly for those with limited credit history.
Budgeting Tool: Can help with budgeting by breaking down large purchases into smaller, predictable payments.

Cons:

Risk of Overspending: The ease of use can lead to overspending and accumulating debt.
Late Fees: Late fees can quickly add up if you miss payments, making BNPL services more expensive than they initially appear.
Potential Impact on Credit Score: Late payments can negatively impact your credit score.
Limited Consumer Protection: BNPL services may not offer the same level of consumer protection as traditional credit products.

Ultimately, the decision of whether or not to use a BNPL service depends on your individual circumstances and financial habits. If you can manage your spending responsibly and make your repayments on time, BNPL services can be a useful tool. However, if you're prone to overspending or struggling to manage your finances, it's best to avoid them. Remember to learn more about Cybershopping and how we can help you make informed financial decisions.