Buy now pay later, and other new credit

Buy now pay later is the credit product built for your generation: no interest, a slick app, and a button at every checkout you already use. Services like Afterpay and Zip split a purchase into chunks, typically four fortnightly instalments with the first taken on the spot. A $200 purchase becomes four payments of $50, and the shop hands over the goods immediately.

Where the money comes from

If customers pay no interest, who pays? Mostly the shops, which hand the service a cut of every sale because customers spend more when the price is quartered. The rest comes from customers who slip: late fees, commonly around $10 a miss, plus account and processing fees on some services. Read that business model carefully. It only works if quartered prices make people buy things they otherwise would not, which tells you what the product is really for.

Why it feels safer than it is

A $340 purchase reading as $85 does something real to your judgement: every price tag shrinks to a quarter of itself while your income stays the same size. One plan is easy. The danger is stacking. Each new purchase starts its own fortnightly schedule from its own date, so five purchases become a drumbeat of instalments landing on different days, and the total is genuinely hard to hold in your head. Miss one because your account ran dry that particular Tuesday, and the free credit starts charging.

The quarter price illusion, with numbers

It is worth making the illusion concrete, because it is doing the real work here. Imagine a fortnight where you buy $600 of things across a few pay later plans: some clothes, a gift, a pair of headphones. At the checkout none of it reads as $600. It reads as a first instalment of roughly $150, spread as four smaller numbers you barely register, so the whole $600 decision feels like a $150 one. But your pay did not quarter. The full $600 still has to come out of your account over the following six weeks, in fortnightly bites that arrive whether or not the money is there. The app quartered the price on the screen. It did not quarter the cost, and it certainly did not quarter what you earn, so the gap between how much you feel you spent and how much you actually spent is exactly where the trouble grows.

The rules caught up

For years buy now pay later sat outside credit laws because it charged no interest. That ended in June 2025: providers now must hold an Australian credit licence and follow modified responsible lending rules, which means checks on whether a customer can afford the plan. That is real progress, and it changes nothing about your side of the deal. A licence does not stop five affordable plans from stacking into one unaffordable fortnight. Only you can see all your plans at once.

So the honest verdict: buy now pay later is credit, full stop. It has the amount, the schedule and the consequences, with the cost hidden in late fees and oversized spending instead of interest. Judge it with exactly the rules from the last lesson: if you could not buy it outright today, splitting it into four does not mean you can afford it. It means you cannot, four times.

What this looks like in your life

The reason this matters more for you than for your parents is that the button lives inside the checkouts you already use, on the clothing sites and the ticket pages and the phone apps that fill your week. There is no trip to a bank, no form, no waiting, so the decision to take on credit happens in the same second and the same mood as the decision to buy, which is precisely when your judgement is worst. Treat the pay later button as what it is, a credit application dressed up as a payment option, and give it the same pause you would give any other. The plan itself is only ever as safe as the habit around it, and the habit is yours to set.