How to shop smarter using pay-later options like Afterpay, Laybuy or Zip

Use pay-later options to your advantage

There are a few things to know about pay-later options to make sure you can stay on top of your spending.

Pay-later options (sometimes called 'buy now, pay later', or BNPL) can be a helpful way to spread out the cost of something over time with no charges added on. It’s easy to pay a part up front, get the goods straight away, and then pay off the rest later. But are they just another way to get in trouble with debt?

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How pay-later options work

“Buy now, pay later” options like Afterpay, Laybuy, Zip, Humm or Genoapay are popular with buyers and sellers alike. They’re offered online, as well as at smaller stores and the big familiar retail brands like Farmers, Freedom Furniture, Cotton On, The Warehouse and Briscoes. Here’s how they work:

  • When you buy something, you pay a small part and the pay-later company pays the rest.
  • You receive the item straight away.
  • Then you pay the company back in instalments – typically three fortnightly repayments. 

So for example, you might want to buy a $100 pair of shoes in a shop that offers Afterpay. You download the app in the store, enter your details, and are approved. You pay $25 up front, take the shoes home, then make three fortnightly repayments of $25 each.

If you miss a repayment because you don’t have enough funds in your bank account when Afterpay goes to deduct each $25, you are charged a penalty of $10.

Pay-later options are a kind of debt. They are a way of borrowing without interest or fees (the seller covers these costs). So while they are a no-cost way to borrow, having too many at once can be hard to keep track of and tricky to handle.

Have only one pay-later option going at a time to help keep track of your repayments and stay clear of late fees.

What’s the catch with pay-later options?

Going into debt is always a bit risky, since our circumstances might change and it becomes difficult to repay. Sometimes it’s hard to tell what might happen.

The aim is to avoid all late fees, otherwise we end up paying more for something than we intended to.

These penalties can end up as high as 25% of the original price – so that $1,000 flat screen could end up costing $1,250 if not repaid on time.

The other catch with pay-later options is that we can get “upsold” on buying more than we planned to.

For example, buying those $100 shoes and only having to pay $25 at first, it can feel like we can afford to spend more. Buying another $100 item with the same upfront $25 payment, for example, means that we will be out of pocket $200 in the end. Buying a third thing feels like we’re just spending $75 at the time, but we’ve just committed to paying $300.

Focus on the full price when you buy, even if you only need to pay much less at first.

Top 5 ways to shop smarter with pay-later options


  1. Take out only one pay-later option at a time.
  2. Use pay-later options to buy larger ticket items only if you have to.
  3. Make sure to have enough funds in your account when repayments are due so you don’t get charged late fees.
  4. If you must take out more than one of these, list them all and set a reminder in your phone when repayments are due.
  5. Steer clear of any shop assistants upselling you because they know you’re using pay-later options.

Frequently asked questions

Do I qualify for pay-later options?

You must be 18 years or over to use them and have a debit or credit card. Some services request your driver’s licence details when you sign up. They will also ask for your full name, home address, email address and mobile number.

So I only pay a part and take home the goods straight away?

Yes. Pay-later options are a way to spread out the cost of something over four or six weekly or fortnightly payments, depending on which one you’re using. You pay the first up front, then the rest of your payments automatically come out of your linked bank account or credit card in the weeks that follow.

Is this for shopping online or in a store?

Both. Pay-later options can be used in a store when you’re making a purchase. You can even download the app at the till and sign up on the spot.

How much can I borrow with buy-now-pay-later options?

Most maximum limits on these pay-later options run from $1,000 to $1,500. But Humm's "Big Things" loans are a bit different and can go as high as $10,000, with the repayments spread out over as long as 24 months.

How quickly do pay-later options need to be repaid?

Repayments are typically scheduled in four or six payments each week or fortnight, depending on which company you’re using.

Are my repayments taken out automatically?

Your first payment will be straight away when you get what you’re buying, and the rest of the repayments will be taken out automatically from your bank account or your credit card.

How many pay-later options can I have at a time?

A typical limit with a pay-later company is up to $1,500, and you can borrow with more than one pay-later company. But having too many of these going at one time is tricky to manage – it’s much easier and safer to have only one going at a time.

Can I decide what day repayments are due?

Some pay-later services allow you to choose which day your repayments are due, but many don’t, so it’s good to make sure it will work for you.

What happens if I miss a repayment?

You’ll be charged a late fee, which is typically a flat fee of $10 or $20, but these can go as high as 25% of the amount you’re borrowing. So if you have a purchase of $1,000 and are unable to repay, it could cost as much as $250 in penalties.

Will it affect my credit rating if I miss a repayment?

Yes. You’ll want to avoid this so you’ll have a good credit score and can borrow more in the future. If you find yourself unable to repay entirely, your debt will be referred to a collection agency.

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