If you’re someone that shops online, chances are you’ve come across buy now pay later (BNPL) services. Afterpay, Klarna and Zip are all BNPL services, and they allow you to repay the cost of a purchase in installments.

You can make these repayments weekly, fortnightly or monthly (with some allowing you to pay the installments earlier). These services have become very popular with Australians, and during the 2021/2022 financial year, the Reserve Bank of Australia reports that BNPL transactions added up to $16 billion across the country.1

Rather than being charged interest on the purchase, you’re usually charged fee(s) if you miss a BNPL service repayment. In some situations, buy now pay later services can benefit the consumer – especially if you’re making necessary purchases.

However, they could also cause financial stress if you lose sight of your expenses. It’s important to consider your individual financial circumstances before using one of these services, as well as researching whether there is a better alternative solution for you.

What are some of the benefits of using buy now pay later services?

There are a few benefits when using BNPL services, especially if you’re someone that is confident in your ability to save and budget.

1. They provide convenience.

One of the biggest positives of BNPL services is the convenience, as they are often available as an option within an online store’s checkout process (some BNPL services are also available in-store). These services will take care of the heavy lifting for you, such as creating a payment plan – all you’ll need is an account with each provider.

When making big purchases, spreading out the cost over a number of equal repayments may put your mind at ease, which is another benefit of BNPL services. If you’re looking to make a purchase but want to maintain a certain amount of cash in your account for a short period of time, then spreading the total cost of a purchase out over several installments may prove beneficial.

2. Interest isn’t charged.

Finally, BNPL services don’t usually charge interest, which could be beneficial if you know you’ll make each repayment when it’s required. There are late fees associated with a payment plan from a BPNL provider, but these only come into effect if you miss a payment. Not having to contend with interest may be the difference between deciding to purchase something you have had your eye on versus waiting for a sale or purchasing it at a later date.  

What are some of the drawbacks of using buy now pay later services? 

1. You could be overspending.

It can be easy to lose sight of how much money you’re truly spending if you frequently use buy now pay later services. They sometimes lead to people overextending their finances and buying more than they can truly afford. If you’re not keeping track of all the payments you need to make as a result of BNPL services, then it can quickly add up.

2. There’s less flexibility when it comes to the payment schedule.

Unlike with loans, you don’t often get the opportunity to pick when your payments come out of your BNPL service account. While this may suit some people who don’t want to have to think about making repayments, it may leave you in unexpected situations if payday doesn’t come when you expect it to - which can result in late fees. If you’re someone that likes to pick when you’ll repay your debts, then this may be a negative.

3. Missing repayments can impact your credit score.

Finally, missing BNPL services repayments can affect your credit score, which may hamper your ability to take out a loan in the future. BNPL services may be considered a line of credit by banks, even though you’re not usually required to undergo a credit check to sign up with a BNPL provider.

If you’re looking to purchase a house soon, for example, then a lender may look at your use of BNPL services to see whether you’ll be able to make your home loan repayments.

Want/need to make a big purchase now, but don’t want to use a BNPL service?

If you’re looking for a way to make a wider range of purchases or build up your credit score with an eye to the future, then you may want to consider applying for a credit card We offer a range of credit cards to suit your situation, including the Visa Platinum, which allows you to accrue Qantas Points*.

 A personal loan could also help you access enough money to make a bigger purchase, without needing to use a buy now pay later service. Taking out a personal loan locks in the amount of money you have access to, so you can better plan your finances going forward.

Knowing how much you’ll have to repay each week/fortnight/month (depending on the repayment schedule you choose) can help you set yourself up for financial success in the future.

What are some of the benefits of using a credit card or personal loan?

1. You could earn rewards and perks with a credit card.

Using a credit card such as our Visa Platinum gives you the ability to earn Qantas points* that could go towards flights and accommodation for your next holiday. You’ll also receive complimentary travel insurance^, which can provide you with coverage while overseas.

A credit card is a popular option since they may offer other perks, such as cashback options and loyalty rewards, as well. 

2. Opportunity to build your credit score.

Provided that you use credit cards responsibly, this can give you the opportunity to build your credit score. This applies to personal loans as well. If you pay off your credit card balance before the due date and make on-time repayments for your personal loan, this can help showcase that you’re a responsible borrower to financial institutions.

3. You can pay for large upfront costs with a personal loan.

If you need to pay a big expense upfront, a personal loan could be a great option as you’ll get the money in a lump sum and be able to spread the cost through easy repayments of either weekly, fortnightly, or monthly instalments. Personal loans may also come with helpful features to help you manage your loan much easier. For example, our personal loan offers $0 account keeping fees and the ability to spread the loan period of up to 7 years.

What are the drawbacks of using a credit card or personal loan?

1. It is easy to accumulate debt on a credit card.

Accumulating debt on a credit card can easily happen if you’re not careful. If you haven’t accounted for ongoing bills and daily expenses, you could put yourself in a position where it may be difficult for you to pay off your credit card in full each month. Not paying your credit card bill in full can lead to interest rate being charged, making you pay more than what you borrowed.

2. There’s less flexibility when it comes to a personal loan.

While there’s a benefit of being issued a lump sum with a personal loan, one drawback is that it could provide you with less flexibility if you require more money. Before taking out a personal loan, you’ll need to ensure that you know exactly how much you need for a big expense. Otherwise, you could end up having to apply for another personal loan, which may impact your credit score.

3. Interest and additional fees may apply.

Interest is payable on outstanding balances on personal loans and credit cards, although some credit cards do not charge interest if you repay the total balance during the interest free period. There are some other costs to consider if you want a credit card or personal loan. Some personal loans have application and/or ongoing fees and some credit cards have annual fees that you need to pay for upon sign up and annually thereafter. For example, our Visa Platinum card has an annual fee of $199. Personal loans may also come with additional costs such as establishment fees. You should consider these before applying for a credit card or a personal loan.

What are some alternatives to buy now pay later services?

Using BNPL services, like any financial decision, can be a positive or a negative, depending on your financial situation. While they may serve as a source of instant gratification if you’d had your eye on a purchase for a while, it may be worth having a look at your budget to see whether you can truly afford to make that purchase.

Spending money that’s not currently in your bank account requires you to plan for every future scenario, as well as a strong resolve. You may want to consider other financial products such as a credit card or personal loan that may work better than BNPL services.

Want to learn more about the various financial options that are available to you? Call us on 1300 747 747.


[1] The Evolving Retail Payments Landscape | Payments System Board Annual Report – September 2022 | RBA  (https://www.rba.gov.au/publications/annual-reports/psb/2022/the-evolving-retail-payments-landscape.html)


The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

*Qantas Points accrue in accordance with and subject to the Visa Platinum Rewards Program Terms and Conditions (contained in the Credit Card Terms and Conditions). You must be a member of the Qantas Frequent Flyer program to earn and redeem Qantas Points. A joining fee may apply, however, Qudos Bank has arranged to provide Qantas Frequent Flyer membership with the joining fee waived to Qudos Bank members who are not already a Qantas Frequent Flyer member and who apply at qantas.com/joinffqudos. Membership and the earning and redemption of Qantas Points are subject to the terms and conditions of the Qantas Frequent Flyer program available online at qantas.com/terms. This offer is non transferable and not available in conjunction with any other offer. Qantas Frequent Flyer membership and each application is subject to approval by Qantas. Qudos Bank recommends that you seek independent tax advice in respect of the tax consequences (including fringe benefits tax, and goods and services tax and income tax) arising from the use of this product or from participating in the Qantas Frequent Flyer program or from using any of the rewards or other available program facilities. Qudos Bank is the issuer, offeror and administrator of the Qantas Points Banking Products and is a credit provider and credit licensee under National Consumer Credit laws.

^As of 30 June 2022, the complimentary Travel Insurance provided with our Qudos Bank Visa Platinum Credit Card has been updated. Please see the Complimentary Travel Insurance Policy Information Booklet for eligibility details. For more information about epidemics and pandemic coverage (like COVID-19), please read the Allianz Global Assistance FAQ.

If you need to make a travel claim, we encourage you to do so at http://www.travelclaims.com.au.

Normal lending criteria, terms and conditions and fees and charges apply

Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305.

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