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Are you using buy now pay later loans like Afterpay or Zip? There are a few things to know to make sure you stay on top of your spending.

Buy now pay later (BNPL) can be a helpful way to spread out the cost of something over time with no charges added on. You pay a part up front, get the goods straight away, and then pay off the rest later. But they’re a type of debt and you can quickly get in trouble if you take on too many at once and start missing payments.

In this guide

How buy now pay later works

Buy now pay later options like Afterpay or Zip are popular with both shoppers and retailers. They’re widely available when shopping online or instore. Here’s how they work:

For example, you might want to buy a $200 pair of trainers in a shop that offers Afterpay. You download the app, enter your details, and are approved. You pay $50 up front, take your trainers home, then make three fortnightly repayments of $50 each.

If you miss a repayment because you don’t have enough funds in your bank account when Afterpay goes to deduct each $50, you are charged an initial late fee of $10 and a further $7 if the payment remains unpaid 7 days after the due date.

BNPL is a type of debt. It’s a way of borrowing without interest or fees (the retailer covers these costs) but having too many at once can be hard to keep track of and tricky to handle. And if you miss repayments, you’ll be charged late fees.

How to use buy now pay later without getting trapped
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How to use buy now pay later without getting trapped

Buy now pay later is interest-free, but it is debt

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 do add up, as high as the following dollar amounts for each purchase:

If you have too many of these at the same time, you may find yourself sacrificing too much of your life in order just to meet all your repayments – which is stressful!

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

For example, buying those $200 shoes and only having to pay $50 at first, it can feel like we can afford to spend more. Buying another $200 item with the same upfront $50 payment, for example, means that we’ve actually spent $400 in the end. Buying a third thing feels like we’re just spending $150 at the time, but we’ve just committed to paying $600.

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Focus on the full price when you buy with BNPL

Keep the big picture in mind, not just that small first payment.
How much is it costing overall?

7 ways to spend safer when using buy now pay later

  1. Think about the full cost. Buy now pay later can be tempting because we think about the upfront payment but we need to look at all the payments in total. What’s the total cost of what you’re buying?
  2. Make only one buy now pay later purchase at a time. Try not to be tempted to take out more until the first is paid off.
  3. Use buy now pay later to buy larger ticket items only if you have to. Better yet, save up for it instead.
  4. If you must take out more than one of these, list them all and set reminders in your phone when repayments are due.
  5. Make sure to have enough funds in your account when repayments are due, so you don’t get charged late fees.
  6. Don’t miss a payment. Missed or even late payments can mean costly late fees and penalties. And paying late can affect your credit rating too.
  7. Treat it like a debt, because it is. Remember, buy now pay later is debt. And debt can be really hard to climb out of, especially if money is already tight. Always think twice before taking on debt.


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.

Yes. Buy now pay later is a way to spread out the cost of something over four fortnightly payments. 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.

Both. Buy now pay later 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.

Most maximum limits on BNPL 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.

Repayments are typically scheduled with you paying one part up front, and then three additional repayments each fortnight.

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.

A typical limit with a buy now pay later company is up to $1,500, and you can borrow with more than one buy now 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.

Some buy now pay later companies 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.

You’ll be charged a late fee. If you keep missing repayments, these penalties can go as high as the following amounts per purchase:

This means your purchases become a lot more pricey than you initially thought. Unfortunately, in order to not miss repayments and avoid these late fees, you may even find yourself sacrificing other parts of your life – which is stressful!

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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