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Buy now pay later services are usually interest free services allowing you to space out the cost of a new purchase over equal fortnightly repayments. While this looks like a flexible alternative to a regular credit card, when you get into the details, it’s not quite as flexible as it sounds. In fact, products like our Freestyle virtual Mastercard® can offer you even longer interest free periods in which to repay your purchases and you’re not restricted to selected retailers.

How does buy now pay later work?

When you apply for a buy now and pay later account like Afterpay, the entire process takes just a few seconds and takes place completely online. Buy now and pay later services will typically have their own app, available for all devices, which keeps track of all of your orders, upcoming payments and details like your credit limit or any fees that you may incur. Deferred payment services are usually free for customers to use but there may be additional fees and charges like late payment fees incurred when you miss a scheduled payment. Common late fee amounts are around $10.00 per missed payment.

Using your buy now and pay later account is usually as quick and simple as using a credit card. When you are shopping online, you fill your shopping cart as you normally would and when you get to the checkout, you choose the deferred payment method of your choice. This sends you directly to your online account where you confirm the payment schedule proposed and you agree to make your first instalment immediately. The payment plan is typically split over 4 fortnightly instalments totalling 42 days interest free and each payment is 25% of your total order.

For example, if you purchased bedroom furniture or a new set of tyres using your favourite pay later service, and your total order was $1,000.00, then you will be charged by that service $250.00 immediately which must be paid at the time of the sale. Your payment schedule will therefore be $250.00 every two weeks from the date of the first instalment for three fortnights and it looks a little something like this:

First payment = $250.00 and is paid at the time of purchase.

Second payment = $250.000 and is paid exactly 14 days after the first instalment.

Third payment = $250.00 and is paid exactly 28 days after the first instalment.

Fourth (and final repayment) = $250.00 and is paid exactly 42 days after the first instalment. 

Your total interest free period is therefore 42 days from the date of purchase and each repayment must be made by the due date or you will incur a late fee of at least $10.00 for every missed payment.

You are also limited to a certain number of concurrent purchases as well as a total credit limit applied to your deferred payment account. New customers must successfully repay their first few purchases before their credit limit is revised and increased, or they may even need to reapply for an increased limit. While there are no fees that most buy now and pay later customers need to pay if they repay their purchases as per their schedule, there are fees incurred by the store you have shopped in. A buy now and pay later service actually agrees to pay the total cost of your order to the shop you have purchased your products from at the time of your purchase in exchange for a percentage of that sale. This means they can keep their deferred payment method free for customers to use. 

Similar to Afterpay, Zip is offered through an application that is compatible with all smart devices. Like Afterpay, you use your Zip account to purchase things like a TV or furniture or a laptop upfront and then repay the cost of your purchases to Zip over a certain time frame. Unlike Afterpay, you do have a little more flexibility when it comes to arranging how you want to repay your purchases. You can choose a specific day, rather than having the due date chosen for you, and you can also opt for the repayment amount.

Afterpay is a straight 42 day interest-free period but Zip is more complicated. If you want an interest free period for a Zip purchase, then you’ll have to pay close attention to what, if any, promotions are currently available. Common promotions include 12 months interest free with the interest rate returning to something close to 18-20% p.a. once the interest free period ends.

Other buy now and pay later alternatives include the Freestyle virtual credit card. Like Zip, you are subject to a credit check when you apply for a Freestyle account, but online applications take just a few minutes to complete. You are also offered up to $10,000 in credit for eligible customers while services like Afterpay offer only a total of $2,000.00 in outstanding payments. If you’re planning to buy a new set of tyres, then $2,000 may not cover it while Freestyle absolutely will. You’re also not limited to a certain number of concurrent purchases, either, while Afterpay will limit you to a maximum number of outstanding orders.

Most importantly, Freestyle offers customers 55 days interest-free on purchases made which is almost an entire fortnight longer than Afterpay. You opt for a repayment schedule that works best for you, skipping repayments when you need to without discovering that you need to pay a late fee like Afterpay charges either. Apply online for a Freestyle account in just a few minutes and get a more flexible buy now and pay later alternative offering your greater versatility and control of your money. 

How is buy now pay later different from credit cards?

Credit cards are a revolving line of credit. When you are approved for a credit card, you are approved for a total credit limit and then free to use as much or as little of that limit as you like. You can choose to make regular repayments to pay off your used credit or you can pay it off immediately, such as when your next pay cycle rolls around. Once you have repaid any used credit from your account, you are free to reuse that credit again and again.

Buy now and pay later services are restricted to individual purchases that you make either in store or online. You cannot borrow additional funds and you cannot use your approved limit everywhere. As buy now and pay later services charge businesses fees to use them, not all businesses are prepared to offer them to their customers. A credit card, on the other hand, will usually be accepted everywhere, including overseas. The Freestyle virtual Mastercard® is accepted around the world.

Finally, buy now and pay later services do not typically require a credit check to get approved for while credit cards will require a credit check. When you apply with MoneyMe for either the Freestyle virtual Mastercard® or any of our personal loan products, we thoroughly and fairly assess every application that we receive. If your credit score is low or your credit history is not as good as it could be then don’t worry. You may still be approved for any of our cash loans or our credit card option, but possibly at a lower credit limit than you were hoping for. 

If you are looking to repair your credit file, then you might want to consider a consolidation loan from MoneyMe too. Consolidating all of your debt into a single personal loan is a great way to simplify and streamline your finances. Get rid of creditors you don’t need any more and possibly save yourself some interest by paying out other debts or loan balances early. Pay off your loan with us over your nominated loan time of between 1 and 5 years with fixed monthly repayments for the life of your loan. Or, you can choose to pay out your loan balance ahead of schedule. We don’t charge our customers early exit fees when they want to close out their loan balance early. 

What are the benefits of buy now pay later?

The main benefit of a buy now pay later service is the ability to repay your purchases within their allocated interest free period at fortnightly intervals and with fixed, equal repayments.

The other benefits of buy now and pay later services are also their disadvantages. Ultimately, your buy now pay later service is available to use only with selected purchases and only at selected stores. You are not able to access your approved credit limit in any other way so you cannot arrange for quick cash transfers when you need them. The disadvantage here is obvious and the possible benefit is that you won’t be tempted to exceed your purchasing limit.

Of course, you can team up your favourite buy now and pay later service with the Freestyle virtual Mastercard® from MoneyMe, giving you the best of both worlds. Apply online now in less than 5 minutes and you could be approved for up to $20,000 in a matter of minutes. As a virtual credit card, there is no waiting time. Once approved, you receive your digital credit card immediately which you can save to your favourite mobile devices.

Apply online now for personal loans up to $50,000 or the Freestyle virtual Mastercard® from MoneyMe.