The difference between buy now, pay later and credit
by Kate Ferraro | 18 October 2021


Fees and charges
Joining up

The buy now, pay later (BNPL) market has exploded in Australia over the past couple of years, as new players like Humm and Klarna join more established market favourites like Afterpay, bringing a variety of product offerings, including different maximum balance amounts and repayment schedules. Shops around the country are signing up to make these flexible repayment tools an option for their customers.

So, what does this mean for the consumer, and how does BNPL compare to traditional credit cards?


Both BNPL and credit cards allow the purchaser to delay handing over a total purchase amount at the time that they buy a product. Which BNPL product you choose will determine your repayment schedule, both in terms of the minimum necessary instalments and the timeline for making your repayments, such as Afterpay, requiring four repayments every two weeks while Humm allows up to five repayments on a fortnightly basis for purchases under $2,000. Crucially, most BNPL services charge no interest, allowing you to make timely repayments of the total amount at no extra cost.

Credit cards also give you a chance to make your repayments at no extra cost. Most come with an interest free period – on average around 44 or 55 days – meaning that effective management of your repayments can see you swerve any extra charges. However, if you fail to make all of your repayments within this window you’ll be charged interest on what you haven’t paid back. Interestingly, and perhaps inspired by growing consumer trends towards BNPL, a number of credit card providers are now offering 0% interest products – like CommBank’s Neo card.

Fees and charges

There are fees and charges associated with both BNPL services and credit cards. While there’s no formal ‘interest’ on BNPL repayments, providers will charge a late fee if you do not repay what you owe according to the schedule, and these fees can increase with each late repayment or follow-up reminder. In addition to charging interest, credit cards usually come with a sign up fee and an annual fee, although occasionally these will be waived in promotional periods.

Be sure to look into all the fees and charges associated with a financial product before making a commitment.

Joining up

Signing up to BNPL and obtaining a credit card have relatively similar rules. Both require users to be Australian residents over 18 years old, and both reserve the right to perform a credit check to ensure you are equipped to make repayments.


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