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New research shows Buy Now Pay Later is not a free or low-cost option compared to traditional credit cards




New research shows that Buy Now Pay Later is not a free or low-cost option compared to traditional credit cards.

New research from Curtin University, commissioned by Financial Counselling Australia, shows Buy NowPay Later (BNPL) fees are effectively a quasi-interest rate that can be more costly than credit card interest rates.

“This is yet another reason why BNPL needs to have the same consumer protections as other forms of credit,” says Fiona Guthrie, CEO of Financial Counselling Australia.

The research compares the late fees and account-keeping fees of BNPL loans with the annual interest rates of a typical credit card. It shows if someone struggles to make repayments, just like a credit card, they will get lumped with charges that can add up to be onpar or more than credit card interest rates, particularly for small purchases.

“It’s evident from our research that BNPL is not a free or low-cost option compared to credit cards.” says report author Dr. Lien Duong, Senior Lecturer at Curtin University’s School of Accounting, Economics and Finance.

Earlier this month, the BNPL industry group AFIA released research which showed the average BNPLpurchase was $151. When applying our research to AFIA’s numbers, for a customer that either incurred late fees or account keeping fees, it reveals an effective interest rate of 28.25% for Afterpay and a whopping 49% for Humm-Little Things – significantly higher than the annual effective interest rate of22%, on average, for a typical credit card.

The Buy Now Pay Later industry promotes itself as being “interest-free”, however, their late payment fee and monthly account fee can add up to an amount that effectively equates to an extremely high quasi-interest charge,” says Dr Duong.

Financial counsellors are seeing increasing numbers of clients using BNPL for small amounts and then paying these fees for multiple transactions.

“Each product you buy with BNPL is subject to its own late fees. We heard the story of a person who was late on an $8 repayment getting lumped with a $10 fee. Imagine if that person had multiple different repayments due in a week. People are being slugged with excessive fees,” says Ms. Guthrie.

Currently, BNPL is exempt from the credit laws, allowing it to bypass important consumer protections that apply to credit cards.

If it quacks like a duck, and walks like a duck, it is a duck. This research reinforces why we need to remove harmful exemptions in our National Credit Law that allow products like BNPL to be unregulated. Whether a consumer uses a credit card or BNPL, they deserve the same protections, concludes Ms. Guthrie.

People in financial stress and who may be struggling with BNPL debts can contact a free and independent financial counsellor on 1800 007 007 or visit

Financial counsellors are not financial planners or advisors. They work in not-for-profit organisations, providing a free and independent service to people in financial hardship.

To arrange an interview, please contact James Hunt on 0452 304 193 or [email protected]


The Federal Government has announced its intention to regulate BNPL, including addressing wage advances. Assistant Treasury and Minister for Financial Services, Stephen Jones, announced on Tuesday 14th July that the consultation has begun to identify appropriate legislation.
Financial counsellors are seeing increasing numbers of people experiencing hardship exacerbated by BNPL. People are too easily becoming overcommitted and struggling to make repayments. Our December 2021 survey of 248 financial counsellors found that 84 per cent reported more than half of their clients had BNPL debt, compared with 31 per cent a year earlier. Many were prioritising buy now, pay later repayments over other essential expenses. The full report can be found here.

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