How to outplay Afterpay

A $20 T-shirt can be a quick and easy purchase via popular buy now pay later apps but experts are warning of the hefty late fees that can blow you budget.

Commonwealth Bank and PayPal will launch their own BNPL products mid-year, joining the crowded market favoured by Millennials wanting their goods instantly with just a down payment and a series of instalments.

Fintech player Afterpay dominates the space, accounting for about 75 per cent of BNPL transactions, followed by Zip Pay, Humm, Klarna, Openpay and BrightePay. We asked the experts how to keep on budget:


But the best tactic is to choose one provider that doesn't charge an account fee or interest, other than late fees, says Canstar financial services executive Steve Mickenbecker. "And then only go into it, if you have absolute belief you will repay it in the assigned period. If you don't, you'll find yourself in just the same trouble people get into with credit cards, and you'll be paying excessive fees. The fees are very high if you allow a few payments to get behind, so it just mounts up very quickly."

Afterpay and the others don't charge a monthly fee or interest, which will be the case with PayPal Pay in 4 (launching) in June. The borrowing limit is from $1000 to $2000.


Mickenbecker says there are a lot of variables, including a range of late fees from $3 to $30. Many providers also cap late fees, anywhere between $30 to $68. Afterpay charges $10 per late repayment and an additional $7 if you don't pay in seven days, according to comparison website It also has a maximum fee of 25 per cent of the item's purchase value, whichever is lower.

Mickenbecker says: "They have different fee structures, like Afterpay for example doesn't charge consumers anything until they miss payments. But then, 20 per cent of its revenue comes from missed payment fees. It depends how you use it. Some are designed for essentials; some for more discretionary spending and some are for big-ticket items."

For example, a $20 shirt could end up costing you $30 because you'll be hit with a flat fee of $10. A $200 handbag, could end up costing $250 due to late fees using Afterpay.


Sarah De Jonge has been using Afterpay for about seven months to buy clothes and other little things as she recently started a new job in retail.

"I use Afterpay because I'm extremely conscious of my budgeting and spending," she says, adding she even sets herself an allowance. "I get paid fortnightly, and its fortnightly repayments so it's much easier for me as well. And with that budget I've set myself for spending, it just makes it easier rather than outlaying the full amount of something. I also like to sort of have a rule, unless it's absolutely needed, I generally pay off one thing with Afterpay before I start paying off another just so I can keep myself in check with what I'm spending."


Sarah De Jonge from Harrington Park uses Afterpay. Picture: Jonathan Ng
Sarah De Jonge from Harrington Park uses Afterpay. Picture: Jonathan Ng


The 33 year-old is even considering paying for her wedding dress via a BNPL-like system at the bridal store. She also has a credit card but doesn't use it much, a rising trend after the explosion of BNPL.

CommBank BNPL will be available to its customers from mid-2021, enabling them to split payments between $100 and $1000 over four instalments. Missed payments will incur a $10 late fee and will be capped at $120. Unlike most players in the space, the bank will do a credit check before approving BNPL customers.

Like Afterpay and others, PayPal Pay in 4 won't charge interest or account fees. But it will charge $10 per late payment, capped at $30, and its borrowing limit will vary per person, which could get people in trouble if they're not financially disciplined.

The borrowing limit ranges from $1000 at Klarna and CommBank through to Zip Pay's $1500. Afterpay and Humm have a $2000 limit. research director Sally Tindall says BNPL providers have "unique set of terms and conditions and potential traps". Afterpay is only available with affiliated retailers such as Best & Less, Bonds, Fantastic Furniture and Adore Beauty. Zip can be used where Visa is accepted.


Originally published as How to outplay Afterpay

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