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Are ‘buy now, pay later’ schemes ever a good idea?

Your Money Live gets the lowdown ahead of Christmas.

When Christmas approaches, the popularity of ‘buy now, pay later’ schemes rocket as Australians look for help getting through the most expensive period of the year.

But how do services like Zip Pay and Afterpay work? And are they a good idea?

The big difference between the ‘buy now pay later’ services and your regular credit card is that there’s no interest charged on purchases.

Too good to be true? Yes, it is.

The catch is that there are significant fees if you don’t make the correct repayments on time.

According to News Corp personal finance writer Sophie Ellsworth there are a few good reasons that users should be wary about jumping on to these services during the Christmas spending period.

While the schemes boast that most customers do make their repayments in time, it’s worth remembering that these schemes make money from customers missing repayments, she said.

Since the repayment rules can be a bit more complicated than a regular credit card, it’s easy to get the days wrong and miss a payment.

Another problem can be when customers link their credit card to these pay-day services to pay off the debt instead, according to Ellsworth, so they can be doubly hit with interest and high fees.

Afterpay vs. Zip Pay

In Australia, two of the most popular ‘buy now, pay later’ services are Afterpay and Zip Pay, but they come with a number of differentiating features.

According to Ellsworth, here’s how they work:


  • Afterpay has millions of users and it’s used across many stores.
  • Customers have to make four equal fortnightly repayments – so if you buy an item worth $200, you’ll have to pay exactly $50 in four instalments over four fortnights.
  • One quarter is charged at the time of purchase.
  • There’s a $10 initial late payment, a $7 late payments fee after seven days, and a maximum late fee of $68.
  • There are no credit checks.

Zip Pay:

  • Zip Pay has fewer users than Afterpay.
  • You have up to 60 days to pay off your purchase in full.
  • You must make $40 minimum repayments each month.
  • There’s a $6 monthly fee if it’s not paid off in full.
  • There’s a $5 late fee after 21 days.
  • There is a credit check, ID check, and banking check.

Watch the full interview in the video above.

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