Buy Now, Pay Later VS Pay Advance: What’s the difference?

The cost of living crisis in Australia has led people to search for convenient financial solutions, like Buy Now, Pay Later (BNPL) and Pay Advance products. BNPL has become a trend in recent years; two out of five Australians have used the service in the past six months. Meanwhile, the number of pay advance users almost doubled in 2022. 

Both BNPL and pay advance offer customers the convenience of immediate access to funds that will be repaid later. The digital accessibility of both products further enhances their convenience, making them increasingly sought after in today’s financial landscape.

As BNPL’s popularity continues to grow, the Australian government has proposed legislative reforms to regulate BNPL products to protect consumers. However, these reforms might negatively impact some customers, such as decreasing their credit scores. Given the similarities between BNPL and pay advance products, pay advance is emerging as a potential alternative for customers who choose not to use BNPL services.

What is Buy Now, Pay Later?

Buy Now, Pay Later is a payment method that allows you to pay in instalments over time. When you choose to pay with buy now, pay later providers, the BNPL providers will pay the full amount to retailers first, while you only need to pay part of it and will pay back the BNPL providers over a few weeks. 

What is pay advance?

Pay advance services, also known as wage-on-demand and wage advance, allow you to access a portion of your pay before the next payday without the involvement of your employers, which will have to be repaid on your upcoming payday. 

How much does each cost? 

Buy now, pay later products are usually interest-free. However, depending on the provider, there might be other costs, including late payment charges, monthly account fees, payment processing fees and sign-up fees. 

For wage advance services, there is usually a withdrawal fee and interest fees, depending on the provider.

When do I need to repay? 

BNPL repayment frequency largely depends on the providers. It is common for providers to split the total amount into 4 instalments paid fortnightly or monthly, while more instalments are also possible for some providers. 

For a pay advance, repayments are expected to be made on your next payday. Many providers offer a split function so you can divide repayments into smaller instalments. 

Do BNPL and pay advance providers do credit checks, and will using the services affect my credit score?

While BNPL providers aren’t mandated to conduct credit checks, some may perform them as part of their approval process. Nevertheless, the BNPL landscape will change very soon as the Treasury has proposed legislative reforms targeting the BNPL industry. The proposed changes will make credit checks mandatory for BNPL products. These checks generate a credit enquiry on your report, potentially affecting your credit score. In addition, your repayment behaviour might influence your credit score. Timely repayment could positively impact your credit score, whereas late payments might negatively impact your credit score. 

As wage advance services are not regulated credit products, they do not directly affect your credit score. However, failing to make payments on time may result in late fees and collection actions, depending on the provider.

How do I access these services?

Buy Now Pay Later Apps and via banks

There are two ways to use Buy Now Pay Later services: via banks offering BNPL services or through BNPL providers. Banks such as Commonwealth Bank and NAB provide BNPL services, which require a bank account connected to the BNPL and purchasing with the associated BNPL credit card. Transactions are automatically split into four instalments and debited from your linked bank account.

Alternatively, BNPL providers like Afterpay, Zip, Beforepay, and PayPal support both online and offline shopping through their Buy Now Pay Later apps. To shop offline, you need to add the provider to your digital wallet via the Buy Now Pay Later app and tap to pay. For online purchases, you can either pay in the app or choose a BNPL provider during checkout on participating retailers’ websites. 

Wage Advance apps

To access your wage before your payday, you will need to create an account with a wage advance company via the app or website. The wage advance provider will estimate how much of your wage you can advance and allow you to apply for funds within the limit. Once approved, funds will be disbursed into your linked bank account.

About Wagepay’s wage advance

Wagepay provides Australians with early access to their wages. Like many BNPL providers, Wagepay is committed to providing customers with convenient and immediate access to funds and flexible repayment options. 

At Wagepay, we charge a maximum 5% flat fee and 24% interest per annum, without any hidden fees or surprise charges. Unlike Buy Now Pay Later products subjected to recent reforms, our product doesn’t require a credit check. We simply assess your bank account transactions during the application process, using this data to calculate a bank score that determines your advance limit. You are expected to repay your advance on your next payday. Wagepay recently introduced a split payment feature that allows you to split your repayment equally into two instalments.

Wagepay’s wage advance is a reliable alternative to BNPL products. Download our app or sign up via the website portal and apply for up to $2,500 today!