Buy Now Pay Later: what you need to know

December 14, 2021

With Christmas shopping well under way, you may have noticed an increasing amount of businesses giving you the option to spread out repayments of a purchase, instead of paying in full at checkout. This is known as a Buy Now Pay Later credit agreement (BNPL).

BNPL credit has traditionally been offered to consumers buying big ticket items such as kitchen appliances, televisions and furniture, and is more commonly known as an ‘in–store credit’ agreement. However, more businesses are now offering BNPL for smaller ticket items. It can be easy to be enticed by BNPL when shopping, especially in the run up to Christmas. Here are some things to consider before deciding whether to use a BNPL service:

What is BNPL?

BNPL allows you to buy goods or services and spread the cost over a number of months/years. Essentially, you are taking out a line of credit, just as you would with a financial institution, to pay for the goods. Depending on what is stated in the terms and conditions of the BNPL agreement, ownership of the goods or services may pass directly to the customer immediately upon purchase, or may not pass until the final repayment has been made. You might have to pay interest on repayments, just as you would when paying back a loan.

Top Tip

The business that you buy the goods or services from, and the business who provide the credit, may not be the same company. You will be provided with the details of any third-party credit businesses when you enter into a BNPL credit agreement.

Can you afford to buy it outright?

At first, it may seem like a better idea to spread out your payment, rather than buying the goods or services outright. However, if you can afford to buy the goods without using BNPL credit, then this is usually the best option because by buying outright you avoid paying interest; you will own the goods straight away and there is no risk of being penalised for a late payment.

If you cannot afford to buy the goods and services outright, and are leaning toward using BNPL credit, take the time to work out when the repayments will be due and make sure that you will be able to afford them at that time.

Top Tip

Consider if the purchase is something that you need right away: is it an impulse buy, or is it something you could save up for and buy outright when you can afford it?

Will you be charged interest?

Before taking out a BNPL credit agreement, check how much (if any) interest you will be charged on your repayments. Some providers offer interest free payments depending on the cost and type of goods or services. Be certain that you can afford the repayments for the duration of the agreement.

Top Tip

If you buy several items but plan on returning some of them, make yourself aware of the consequences of a late return, whether it’s your fault or not, if the company doesn’t receive them on time.

Who should you contact if you are unable to make repayments?

If you are unable to make repayments, your first point of contact will be the business who provided you with the credit. Remember, this may not be the same company as you bought the goods from. When using BNPL credit to make any purchase (online or in-store), you should always be provided with

  • the name of the financing company
  • the terms and conditions of your credit agreement and
  • the credit agreement itself

For independent advice on debt and budgeting, contact your local the Money and Budgeting Service (MABS) centre or visit their website.

For more information on Buy Now Pay Later, click here.


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