How Does Buy Now, Pay Later Work?

You apply for the credit, ‘buy’ goods and you get it straight away (or it’s shipped if you order online). You then pay it off - usually with four, fortnightly instalments.

The main ‘buy now, pay later’ services operating in New Zealand are:

  • Afterpay
  • Oxipay
  • PartPay (25% paid upfront)
  • Laybuy (Six, weekly payments)


If you pay all the instalments on time you won’t pay ANY interest or fees

You don’t need to be a rocket scientist to see why this is so popular, especially with young people.

Most customers start off with a low credit limit

Usually $1,000 or less - to get a higher limit, you need to prove you’re a good payer. From our point of view, that’s a good thing.

Not a good payer? They’ll restrict your spending

If your payment history with a service hasn’t been great, you may be restricted in what you can buy from them later (if anything at all).


If you pay late you’ll be charged a late/penalty fee

And if you default on a payment (don’t pay it), this can affect your credit history … Eventually a debt collector could become involved.

Even if you do everything right, not every ‘buy now, pay later’ service passes this positive credit history onto credit reporting agencies (this type of information can be good for Credit Reports and Credit Scores).

A credit check usually isn’t done on applicants

That may seem like a good thing, but it does put some people at risk of taking on payments they can’t afford, especially if they’re using multiple ‘buy now pay later’ services.

You can’t change your mind

Unlike traditional laybuy, once you make the first payment, you have legally bought the goods - you can’t simply change your mind and cancel your purchase. Though if there’s a problem with the goods, they may be covered by the Consumer Guarantees Act, and/or Fair Trading Act. However, refunds are via the store, then the service, which can slow things down.

The credit card trap

Many people fall into the trap of using a credit card (instead of a debit card) to pay the instalments. Avoid this unless you’ll definitely pay the credit card balance in full by the due date; before you get charged interest.

Pros and cons aside, whether these services are here to stay, remains to be seen. There’s a possibility they may end up being regulated under the Credit Contracts and Consumer Finance Act (CCCFA). Afterpay has said if this happens, they may ‘cease trading in New Zealand’.

Love My Money’s advice? Unless you’re sure you can easily afford the instalments and you’ll commit to paying them on time, we suggest you save up instead.

If you’re in debt already and want to pay it off faster, our ‘Get on Top of Short-term Debt’ Journey can help you with that.