While Buy Now, Pay Later (BNPL) can be a helpful way to spread payments, it is a type of debt and comes with risks. Did you know there are late fees if you miss a repayment? Be careful you don’t get trapped. That pay later can quickly turn into pain later.

We’ve all been there – you see a great sale but don’t quite have enough money saved up so you use BNPL. And then the latest smartphone is being released or you’ve got to buy a present last minute for one of your friends. Why not take out another BNPL for those too? After all, you’ve got the money for the first payment and it’d be great to be able to get it now and pay it off later. Well, that’s where things can start to go wrong. It can be easy to lose track of what you’ve borrowed, and before you know it, you’re not keeping up with the repayments and those late fees start adding up.

5 tips for spending safer when using Buy Now, Pay Later

  1. Try not to be tempted to take out more than one at a time.
  2. Use Buy Now, Pay Later to buy larger ticket items only if you have to. Better yet, save up for it instead.
  3. If you must take out more than one of these, list them all and set reminders in your phone when repayments are due.
  4. Make sure to have enough funds in your account when repayments are due, so you don’t get charged late fees.
  5. Don’t get left with a black mark on your credit rating by missing repayments and not paying off any penalties.

Savvy tips from a Buy Now, Pay Later spender

Freya shares her story on how using Buy Now, Pay Later became a bit addictive. Read how she now keeps her spending in check with her rules for not going off the rails.

READ THE BLOG

Buy Now, Pay Later FAQs

How does Buy Now, Pay Later work?

Buy Now, Pay Later is a type of debt. It’s a way of borrowing without interest or fees (the retailer covers these costs), as long as you use them right. When you buy something, you pay a small part and the BNPL company pays the retailer the rest. You receive your purchase straight away. Then you pay the company back in instalments. Most maximum limits on BNPL run from $1000 to $1500. 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.

What’s the catch with Buy Now, Pay Later?

Going into debt is always a bit risky, since circumstances might change and it could become 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 $1000 flat screen could end up costing $1250 if not repaid on time. The other catch with BNPL is that we can get “upsold” on buying more than we planned to.

Is Buy Now, Pay Later a good idea?

BNPL can be a great way to spread the expense of a purchase and not get charged any interest but you need to use it sparingly and know the risks. As soon as you’re late with a repayment you’ll be stung with late fees. And if you keep failing to make payments then it could negatively affect your credit rating and ability to borrow money later on.

How many Buy Now, Pay Later purchases can I have going at one time?

A typical limit with a BNPL company is up to $1500, and you can borrow with more than one BNPL 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. If you must take out more than one of these, list them all and set a reminder in your phone when repayments are due.

Is Afterpay a loan?

Yes. When you buy something using BNPL like Afterpay, Laybuy or Humm, you pay a small part straight away and the BNPL company pays the rest. You receive the item straight away. Then you pay the company back in instalments – typically three fortnightly repayments. This type of loan, if you make the repayments on time, is interest-free. But costs can add up if you miss a payment.

What happens if I miss a payment with Buy Now, Pay Later?

You’ll be charged a late fee, which is typically a flat fee of $10 or $20. But if you keep missing payments, the penalties can go as high as 25% of the original price you paid.