Buy Now Pay Later and Credit Cards: General Information and Comparison

Buy now pay later (BNPL) services and credit cards are two types of payment arrangements that allow consumers to access goods or services and repay the cost over time.

This article provides general information about how BNPL services and credit cards operate, including key features, fees, and considerations. It does not constitute financial product advice.

Overview of buy now pay later (BNPL)

Buy now pay later services are payment arrangements that allow purchases to be split into instalments over a defined period.

Common characteristics may include:

• Payments divided into instalments over a short timeframe
• No interest on standard plans if repayments are made in accordance with terms
• Fees that may apply if repayments are missed
• Availability through participating retailers or platforms

BNPL products and terms vary between providers. Some providers may offer longer-term arrangements that include fees or interest charges.

Examples of BNPL providers operating in Australia include Afterpay, Zip, Klarna, Humm, and Bundll.

Overview of credit cards

A credit card is a form of revolving credit that allows funds to be borrowed up to an approved limit.

Common characteristics may include:

• Ability to make purchases up to a credit limit
• Interest charged on outstanding balances where applicable
• Interest-free periods on purchases if conditions are met
• Ongoing account fees or transaction-related fees

Credit cards are widely accepted for payments in Australia and internationally, subject to merchant acceptance of card networks.

Application and access

BNPL

Access to BNPL services is typically provided through a digital account or application. Approval processes vary between providers and may involve different levels of verification.

Credit cards

Credit card applications generally involve a more detailed assessment, including consideration of income, expenses, and credit history. Approval outcomes depend on lender criteria.

Usage and acceptance

BNPL

BNPL services are generally available through participating retailers. Availability depends on whether the merchant supports the specific provider.

Credit cards

Credit cards may be used at merchants that accept the relevant card network (e.g. Visa, Mastercard, American Express), including domestic and international transactions.

Fees and charges

BNPL

BNPL fee structures vary depending on the provider and product. Common fee types may include:

• Late payment fees
• Account fees (for some products)
• Interest charges on extended payment plans

Credit cards

Credit card fees and charges may include:

• Interest on outstanding balances
• Annual account fees
• Late payment fees
• Foreign transaction fees
• Balance transfer fees

Interest rates and fees vary depending on the provider and product terms.

Repayment structures

BNPL

Repayments are typically structured as fixed instalments over a short period. The schedule is set at the time of purchase.

Credit cards

Repayment amounts may vary depending on the outstanding balance. Minimum repayments are generally required, with additional payments reducing the balance and associated interest.

Credit reporting considerations

Credit cards

Credit card activity is commonly reported to credit reporting bodies. Repayment history and account behaviour may influence an individual’s credit profile.

BNPL

BNPL reporting practices vary between providers. Some providers may report missed payments or account activity, while others may not report all activity.

General considerations

The total cost and suitability of any payment product depend on factors such as:

• Fees and charges
• Repayment obligations
• Frequency and timing of payments
• Individual financial circumstances

Understanding product terms and conditions is important when considering any financial arrangement.

Alternative credit products

In addition to BNPL and credit cards, other forms of credit may be available.

Personal loans are one example of a structured credit product, where funds are borrowed and repaid over a fixed term with scheduled repayments.

Credit24 offers personal loans with features that may include:

• Loan amounts between $500 and $10,000
• Fixed repayment schedules
• Online application process
• Disclosure of fees and charges prior to acceptance

All applications are subject to responsible lending assessments and eligibility criteria.

Important information

Financial products involve obligations, including the requirement to repay borrowed amounts and any applicable fees or interest. Product features, costs, and availability vary between providers.

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839.

The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, charges, and terms and conditions apply. For full details, visit www.credit24.com.au.