Buy now pay later: how it works and the rules since June 2025
Buy now pay later (BNPL) lets you split a purchase into instalments, usually over a few weeks, with no interest but with fees if you pay late or keep an account open. Since 10 June 2025 it has been regulated as credit: providers need an Australian credit licence, must check you can afford what they lend, and must offer hardship help and access to free external complaints.
This guide explains how BNPL works, what changed in 2025, the fee caps, how it shows on your credit report, how lenders treat it when you apply for a car or home loan, and how it compares with a credit card or lay-by.
By Better Rate Mate Editorial Team · Last reviewed
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
How buy now pay later works
You buy something and pay for it in instalments instead of upfront. For small purchases that's typically four payments over a few weeks; for larger purchases, some services spread repayments over months or years. Moneysmart notes you usually don't pay interest, but you can be charged late fees, monthly account fees, payment processing fees or establishment fees, and your bank may charge overdrawn fees if a repayment bounces.
What changed on 10 June 2025
The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 brought BNPL under the National Credit Act. From 10 June 2025, anyone providing BNPL credit must hold an Australian credit licence and be a member of the Australian Financial Complaints Authority.
BNPL contracts that meet the "low cost credit contract" rules can use modified responsible lending obligations set out in ASIC's Regulatory Guide 281. Providers still have to check suitability and credit history, but the depth of the check scales with the amount: ASIC's guide describes a negative credit check where your total BNPL credit with the provider is under $2,000, and a more detailed check at $2,000 or more.
| Before | Since 10 June 2025 | |
|---|---|---|
| Credit licence | Not required | Required |
| Affordability checks | Not required by credit law | Responsible lending obligations (modified for low cost credit contracts) |
| Hardship and complaints | Not required by credit law | Hardship processes required; free external complaints through AFCA |
| Fees | Set by each provider | Capped for low cost credit contracts |
Fee caps
For low cost credit contracts, the regulations cap the fees a provider can charge you across all your contracts with it in each 12-month period: $200 of non-default fees in the first 12 months and $125 in each later period, and $120 of default (late payment) fees. Moneysmart's advice is to check your contract to see whether a fee cap applies to you.
Fees that look small add up when you miss payments across several services, which is why Moneysmart suggests using one service at a time and linking it to a debit card rather than a credit card, so you aren't paying card interest on top.
Does buy now pay later affect your credit score?
It can. Moneysmart says BNPL arrangements, applications and late fees might appear on your credit report, and late or missed BNPL payments can be reported and reduce your score. Each application may trigger a credit check, and lots of checks can be a red flag for lenders. On the other hand, a hardship arrangement with a BNPL provider won't appear on your credit report.
Buy now pay later and your car or home loan application
When you apply for a car loan, personal loan or mortgage, the lender looks at your credit report and your bank statements. BNPL repayments are commitments that reduce what you can afford to borrow, and regular use can prompt questions about your spending. If you're planning a big application, pay off BNPL balances, close accounts you don't need and let a few months of clean statements build up first. Our car loans and home loans guides explain how lenders assess you.
Buy now pay later vs credit card vs lay-by
Each costs nothing if used carefully and a lot if not:
| Buy now pay later | Credit card | Lay-by | |
|---|---|---|---|
| Get the item | Now | Now | When it's paid off |
| Interest | Usually none | On unpaid balances (standard cards averaged 21.24% in September 2026) | None |
| Fees | Late, account and processing fees (capped for low cost credit contracts) | Annual fee; late fees | Moneysmart: no account-keeping or late fees |
| Credit check | Yes, since June 2025 | Yes | No |
| Risk | Easy to overspend across several services | Debt can revolve for years | Low |
BNPL vs credit cards in detail
BNPL suits a single purchase you can pay off in a few weeks from money you already have. A credit card suits ongoing spending you clear in full each month. Both become expensive when you pay late or roll a balance, just in different ways: BNPL through fees, cards through interest. Paying BNPL instalments with a credit card combines the risks, which is why Moneysmart suggests a debit card.
| Buy now pay later | Credit card | |
|---|---|---|
| How you repay | Fixed instalments over weeks, or longer for bigger purchases | Any amount above the monthly minimum |
| Where you can use it | Participating retailers, and some arrangements through card networks | Almost anywhere cards are accepted |
| Credit check | Since 10 June 2025; how much is checked depends on the amount | A full responsible lending assessment, including whether you could repay the limit within 3 years |
| Credit report | Applications, arrangements and late payments can appear | Applications, limits and 2 years of repayment history appear |
| Rewards | Generally none | Some cards earn points or cashback |
If you can't make a payment
Every BNPL provider must have complaints and hardship processes, so contact yours as soon as you know a payment will be missed. For free help, call the National Debt Helpline on 1800 007 007. Aboriginal and Torres Strait Islander people can call Mob Strong Debt Help on 1800 808 488, and Way Forward (1300 045 502) can arrange a free debt repayment plan if you're in hardship. If you're juggling several BNPL accounts and cards, read our guide to debt consolidation before borrowing to clear them.
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
What to watch for
- "Interest free" isn't "fee free". Check late, account and processing fees before you sign up.
- Using several services at once makes it easy to lose track and pay multiple late fees.
- Missed payments can be reported on your credit file and affect future loan applications.
- Link BNPL to a debit card, not a credit card, so you don't pay card interest on top.
- Close accounts you don't use before applying for a home or car loan.
Common questions
Is buy now pay later a loan?
Yes. Since 10 June 2025 BNPL has been regulated as credit under the National Credit Act, so providers need a credit licence and must assess whether the credit is suitable for you.
Does buy now pay later affect your credit score?
It can. Applications may trigger a credit check, and late or missed payments can be reported and lower your score. A hardship arrangement with a BNPL provider won't appear on your credit report.
Can buy now pay later stop me getting a home loan?
It won't automatically, but lenders count BNPL repayments as commitments, check your credit report and read your bank statements. Missed payments or heavy use can reduce what you can borrow or lead to a decline.
Are buy now pay later fees capped?
For low cost credit contracts, yes: across your contracts with one provider, non-default fees are capped at $200 in the first 12 months and $125 in each later 12-month period, and default fees at $120. Check your contract to see whether the caps apply.
Is buy now pay later cheaper than a credit card?
If you pay every instalment on time, BNPL usually costs nothing, while a card charges interest on balances you don't clear. Late fees on BNPL and interest on a card both add up quickly, so the cheapest option is the one you can pay off in full on time.
Free help
If repayments are getting hard, call the National Debt Helpline on 1800 007 007 (9:30am to 4:30pm on weekdays) for free, confidential financial counselling, or ask your lender's hardship team for help before you miss a payment. This page is general information, not financial advice.