'The way Australians use buy now, pay later (BNPL) services is changing. What was once mainly used for one-off purchases is now increasingly being used to cover everyday expenses, making it more important than ever to understand how they work and the impact they can have on your finances. With new laws now in place to strengthen consumer protections, here's what you need to know before you tap 'pay later'.
What is buy now, pay later?
'Buy now, pay later' services allow you to make purchases through participating retailers and repay the cost over a series of instalments, rather than paying the full amount upfront.
Many BNPL services don't charge interest if repayments are made on time, but they may charge fees such as late payment fees if you miss a repayment. Although they can offer flexibility, it's important to remember that BNPL is still a form of credit and should be treated like any other financial commitment.
How do buy now, pay later services work?
Buy now, pay later services can usually be used online and in store at participating retailers. At checkout, you select the BNPL payment option and agree to repay the purchase over a set schedule, commonly four instalments spread across several weeks.
As long as you make your repayments on time, you'll generally pay the original purchase price. However, missing repayments may result in additional fees and could affect how future lenders assess your credit application.
What are the risks of using buy now, pay later?
Because ‘buy now, pay later’ repayments are often smaller and spread out, it can be easy to underestimate how much you’ve committed to, particularly if you’re using multiple ‘buy now, pay later’ services or making several purchases at once.
Without careful tracking, repayments can overlap and place unexpected pressure on your budget. Missing payments may also lead to fees and make it harder to stay on top of your finances.
Keeping track of your repayment schedule and factoring ‘buy now, pay later’ commitments into your budget can help reduce the risk of debt building up over time.
How have the rules changed?
Since June 2025, buy now, pay later providers have been subject to new Australian credit laws.
Providers must now hold an Australian Credit Licence and comply with consumer protection requirements, including modified responsible lending obligations. This means providers must take reasonable steps to assess whether a BNPL product is suitable for you before offering credit. Depending on the provider and the product, this may include asking about your financial situation and, in some cases, checking your credit history.
The reforms also introduced additional protections for customers. BNPL providers are now required to have hardship processes for customers experiencing financial difficulty and must be members of the Australian Financial Complaints Authority (AFCA), giving customers access to free, independent dispute resolution if an issue can't be resolved directly with their provider.
Can buy now, pay later affect your credit score?
Using buy now, pay later can now have a greater impact on your credit score. Under the updated regulations, applying for BNPL will generally involve a credit check, and the resulting credit enquiry may be recorded on your credit report. Multiple BNPL applications or having several BNPL accounts at once may signal to lenders that you have a higher level of existing credit commitments, which could affect how they assess your ability to take on additional borrowing.
Your BNPL repayment behaviour may also influence your credit health. Making repayments on time can help demonstrate responsible financial behaviour, while missed or late repayments may be reported to credit reporting bodies and could negatively affect your credit rating.
When you apply for a mortgage, personal loan or other forms of credit, lenders may consider your BNPL usage alongside your income, expenses, existing debts and repayment history. Outstanding BNPL balances, frequent use of multiple services or a history of missed payments may affect how lenders view your overall ability to manage new credit.
Keeping track of your BNPL commitments and making repayments on time can help protect your credit history and improve your chances of being approved for future credit.
Tips for using buy now, pay later responsibly
If you're considering using a BNPL service, keep these tips in mind:
- Only use BNPL for purchases you can comfortably afford to repay
- Include BNPL repayments in your household budget so you understand your total financial commitments
- Avoid having multiple BNPL purchases running at the same time if possible
- Set up payment reminders or automatic repayments to help avoid missed payments and late fees
- If you're experiencing financial hardship, contact your BNPL provider as soon as possible to discuss the support options available.
Used carefully, buy now, pay later can offer flexibility when managing your spending. However, it's still a form of credit, so understanding your obligations and borrowing within your means can help you avoid unnecessary financial stress.