Buy Now Pay Later products — Afterpay, Zip, Humm, Klarna, PayPal Pay Later — have grown from a retail novelty to a mainstream payment method used by more than six million Australians. They are marketed as free alternatives to credit cards. That framing is misleading. The costs are real; they are just structured differently and mostly fall on people who miss payments or misuse them.
The "free for consumers" model is funded by merchants. BNPL providers charge retailers a merchant fee of approximately 3–6% of the transaction value — significantly higher than the 0.5–1.5% interchange fee on most debit cards. Retailers pay because BNPL is associated with higher average order values and reduced cart abandonment. Consumers effectively pay this cost through slightly higher retail prices, even if they never use BNPL themselves.
The second revenue source is consumer late fees. Afterpay charges $10 per missed instalment, capped at 25% of the original order value. Zip charges $5–$15 in account-keeping fees plus late fees depending on the product. Humm charges $6 per missed payment. These fees are individually small but compound quickly for users managing multiple BNPL arrangements simultaneously.
| Provider | Late fee | Account-keeping fee | Interest |
|---|---|---|---|
| Afterpay | $10 per missed payment (capped at 25% of order) | None | None |
| Zip Pay | $5 per month if minimum not met | $9.95/month (waived if balance paid) | None (Zip Pay) / up to 19.9% (Zip Money) |
| Humm (small things) | $6 per missed payment | None | None |
| Klarna | Varies by product; up to $9 | None (Pay in 4 product) | Up to 19.99% (financing product) |
This is the area where BNPL has the most significant long-term financial consequence for consumers. As of 2024, Australia's major BNPL providers began reporting credit information to credit bureaus — a shift from the prior position where most BNPL activity was not visible to lenders. This change has two effects. First, missed BNPL payments can now appear on your credit report and reduce your credit score. Second, lenders assessing mortgage or personal loan applications can see the number of active BNPL accounts, even if they are being repaid on time, and may factor this into serviceability calculations.
Mortgage lenders treat multiple active BNPL accounts as evidence of reliance on short-term credit facilities. Even if you are not missing payments, having three or four concurrent BNPL arrangements can reduce your borrowing capacity or trigger additional scrutiny in a home loan assessment. If you are planning to apply for a mortgage, close BNPL accounts you are not actively using beforehand.
BNPL operated outside Australia's consumer credit regulatory framework for most of its existence. The National Consumer Credit Protection Act did not apply to BNPL products because they were structured to fall outside its definition of credit — no interest charge, short repayment term. This meant providers had no obligation to assess a consumer's ability to repay before extending credit.
The Australian Government passed legislation in 2024 bringing BNPL products under the National Credit Code. This means BNPL providers are now required to hold an Australian Credit Licence, conduct affordability checks for new customers, meet responsible lending obligations, and comply with the hardship provisions of the Credit Act. These requirements began phasing in from 2025. In practice, this means BNPL applications now trigger a credit check and income/expense assessment similar to a credit card application, which was not previously the case.
For consumers who pay off their credit card balance in full each month, a rewards credit card is usually financially superior to BNPL. You earn points on the same purchase, your credit limit is not split across multiple providers, and there is one statement rather than multiple repayment schedules to track. The merchant fee the retailer pays (and passes on) is lower on a debit card than any BNPL product.
BNPL is better than a credit card in one specific scenario: if you know you will not pay the card balance in full and will incur interest at 19–22% per annum. In that case, a free BNPL instalment plan (paid on time) is cheaper than card interest. This logic only holds if you have the discipline to meet every BNPL instalment — if not, the late fees plus card interest you may also be accumulating elsewhere can exceed what you would have paid in card interest alone.
Research consistently shows that BNPL increases total spending relative to outright purchase. The act of deferring payment reduces the psychological cost of buying, which is the feature, not a bug, from the retailer's perspective. For consumers, this can mean purchases that would not have been made are made, funded by future income that may be needed for other commitments. Managing four simultaneous BNPL repayment schedules across different providers is harder than managing one credit card statement, and the fragmentation makes it easier to lose track of total obligations.
Check whether your savings rate is competitive — particularly if BNPL is covering cash flow gaps your savings account should be filling.
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