How it works
Buy now, pay later payment services such as Afterpay, zipPay and Klarna allow you to do just that: buy something now and pay for it later.
You usually need to make a minimum payment for the item you buy when you shop online or at a store, then pay the rest of the purchase off over instalments. Many service providers require you to pay your purchase off fortnightly, over three or four instalments.
You’re charged little to no interest for using buy now, pay later, but could be charged late fees if you miss a payment or don’t have enough money in your account for it. Some providers charge monthly account fees and payment processing fees. Check these before you sign up.
What is it useful for?
Buy now, pay later is useful for people who have uneven cash flow, such as freelance or contract workers, who may need extra credit to smooth out their expenses. It can also help if you have room in your budget to afford one instalment, but aren’t able to make the whole purchase in one go.
You may find you need an item right away that you don’t have time to save for. Say your fridge breaks down and you don’t have enough in your rainy day fund for a new one. The fact you will pay little to no interest for using buy now, pay later can make this option even more attractive.
What you need to know about it
1. Think about the cost first
You need to be able to afford the item you’re buying not only now, but in the future. It’s easy to be optimistic about buy now, pay later purchases, particularly when the price of the instalment seems small compared to the overall cost of the item.
Before you make a purchase, make sure you’ve accounted for your essentials such as your bills and rent or mortgage payments, so you don’t spend money that should go to your financial obligations.
2. Make sure you can afford it in the future
Find out when the next payments are due so you can account for this in your budget and allocate money for the next payment on or soon after pay day. Many providers automatically deduct the payment from your account, so make sure you know which account you made the purchase from.
You might like to set a reminder before the payment due date to make sure you have the money and avoid late payment fees.
3. Stay on track with your spending
While buy now, pay later can make necessary items more affordable by drawing out the payment over time, be careful not to become overcommitted by making too many purchases. You could find yourself juggling a number of payments on the go, each with a different due date that you could easily forget about or realise you’re not able to afford.
If you find it easy to spend impulsively, be extra careful – as with many cashless payments, buy now, pay later are often so easy to use that you could pay for something without stopping to think.
You might like to turn on Transaction Notifications in the CommBank app so you can see when money goes in and out. Spend Tracker, in accounts view, can also help you see which categories you’re spending the most money on. This can help you keep spending in check.
4. Understand the impact to your credit score
Be sure not to overstretch yourself financially or get into unmanageable debt through buy now, pay later. Some payment programs might even report negative activity to credit reporting agencies which could affect your ability to obtain credit in the future.
Need help?
If you bank with us and need help, our Financial Assistance Solutions Teams have helped thousands of customers – from people who need help managing bills so they pay on time, through to families struggling to make ends meet.
Call us on 13 30 95 if you need medium-term or on-going financial assistance as a result of financial difficulty. We work with you to develop a solution tailored to your needs. If you’re not in that position yet, there are other ways we can support you.