What Is Buy Now, Pay Later, And Should You Use It?
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Noticed a new payment option when you check out your purchase? A whole slew of Buy Now, Pay Later (BNPL) platforms have recently appeared in Malaysia. They promise an easy way to afford your latest purchase, usually without any interest or fees. But how do they work, and what’s the catch?
What is Buy Now, Pay Later?
BNPL platforms let you make purchases by splitting the cost into monthly instalments, usually at 0% interest. Alternatively, some platforms let you delay the payment until the end of the month, or the following month. The catch is that they might charge you late payment fees if you don’t pay up.
Here’s how it works:
- When you purchase something through a participating retailer, you can choose to pay via a BNPL platform.
- You may be asked to make a down payment, typically the first month’s instalment of the purchase amount.
- You pay off the rest through monthly instalments.
Advantages of Buy Now, Pay Later
- 0% interest instalments. Most BNPL platforms offer 0% interest on your purchases. This means that you don’t have to pay any interest or fees – unless you miss a repayment.
- Might not need a good credit score to qualify. To apply for a 0% interest instalment with a credit card, you’d need, well, a credit card. And to get one, you’d need a decent credit score. But some BNPL platforms may not perform credit score checks, which means you could take out an instalment with them even if you have a poor credit score.
- Break purchases into manageable payments. BNPL can be useful if you have a large purchase, but you want to break it up into smaller payments so you don’t strain your monthly budget. For example, if your laptop suddenly breaks down, and you need RM3,000 to replace it, you could break that into three monthly payments of RM1,000 instead of draining your emergency fund. This gives you some financial buffer in case another financial emergency comes up this month.
Downsides of Buy Now, Pay Later
- High late payment fees. Most BNPL platforms will charge you a fee if you can’t pay your instalment. Depending on the platform, this may end up being more expensive than using a credit card.
- Might make you spend more. BNPL platforms make it easier to buy things you might not otherwise be able to afford if you had to pay for it in full, or if you hadn’t budgeted for it. While this can be useful for things that you need, it also makes it easier to spend on impulse purchases or unnecessary items.
- May hurt your credit score if you miss payments. Some platforms may report your missed payments to credit reporting agencies, which could hurt your credit score.
Buy Now, Pay Later platform comparison
Which BNPL platform should you go with? Here’s a comparison of eight platforms available in Malaysia: Atome, myIOU, Hoolah, PAYLATER, PayLater by Grab, SPayLater by Shopee and Split.
| Platform | Tenure | Processing fee | Late payment fee |
|---|---|---|---|
| Atome | 3, 6, or 12 months | 0% | RM30 per late payment (max RM60 per purchase) |
| myIOU | 2, or 3 | 0% | RM5 or 1% on outstanding amount per late payment - whichever is higher |
| MobyPay | 2 to 6 months | 0% | RM20 per late payment |
| PAYLATER | 4 months | 0% | RM10 for every 7 days of non-payment |
| PayLater by Grab | Pay next month or 4 months | 0% | RM10 for overdue postpaid bills or every instalment bill to reactivate a suspended PayLater account |
| SPayLater by Shopee | Pay at the end of the month or , 3 6, 12 months | 1.5% a month on total order amount for 3 month plan and up | RM10 on late payment |
1. Atome
| Tenure | Late payment fee | Credit limit | Merchants include |
|---|---|---|---|
| 3, 6 and 12 months | RM30 per late payment (max RM60 per purchase) | Non credit card users: RM1,500 Credit card users: RM5,000 | Zalora, The Face Shop, Shein, Ezbuy, Machines, Agoda |
However, there is a relatively high penalty charge of RM30 per late payment, although the maximum late fees you can incur is RM60.
2. myIOU
| Tenure | Late payment fee | Credit limit | Merchants include |
|---|---|---|---|
| 2 or 3 months | RM5 or 1% on outstanding amount per late payment (whichever is higher) | RM1,000 to RM10,000 | Senheng, Drone Hub, Gintell |
However, it appears to support a limited number of merchants – and those that it does support also seem to be lesser-known brands. But on the upside, it has a few merchants for those looking for B2B services.
myIOU charges a minimum of RM5 or 1% for each late payment. That’s comparable to late payment fees on credit cards, which typically charge a minimum of RM10 or 1% per late payment.
3. MobyPay
| Tenure | Late payment fee | Credit limit | Merchants include |
|---|---|---|---|
| 2 to 6 months | RM20 per late payment | RM10,000 | OGAWA, OTO, La Gourmet, Delfino |
Both platforms offer flexible payment options, including interest-free instalments of up to 6 months and PayNow for immediate payments. At the same time, MOBY Islamic ensures that all retail partners, transactions and processes are aligned with the Shariah law.
4. PAYLATER
| Tenure | Late payment fee | Credit limit | Merchants include |
|---|---|---|---|
| 4 months | RM10 for every 7 days of non-payment | Based on user assessment | Oppo, Gamer’s Hideout, DJI, DirectD, Metrojaya |
Unlike other platforms in this list, which charge late fees per month, PAYLATER charges an RM10 fee for every seven days of non-payment. This means that if you continuously miss payments, you could incur fees of (RM10 x 4 weeks x 3 months; assuming the first month’s instalment is paid upfront) of RM120.
5. PayLater by Grab
| Tenure | Late payment fee | Credit limit | Merchants include |
|---|---|---|---|
| Pay the following month or 4 months | RM10 for overdue postpaid bills or every instalment bill to reactivate a suspended PayLater account | Based on user assessment | DirectD, Shiseido, Zalora, Hermo, Shein, Machines |
If you miss a payment, your PayLater account will be frozen, and you will have to pay an RM10 administration fee to reactivate it – this is only applicable for customers who choose the monthly installment payment method only.
6. SPayLater by Shopee
| Tenure | Processing fees | Late payment fee | Credit limit |
|---|---|---|---|
| Pay at the end of the month or 3, 6, or 12 months | 1.5% a month on total order amount for 3 month plan and up | Maximum RM10,000, based on user assessment | Maximum RM10,000, based on user assessment RM10 on late payment |
This makes it quite expensive to pay through instalments. For example, if you make a purchase of RM3,000 and choose a tenure of six months, you may have to pay RM225 (RM3,000 x 1.25% x 6 months; assuming you pay the first month upfront) in processing fees alone.
What happens if you miss a payment?
a) You may incur late payment fees
Buying through a BNPL platform is only interest-free if you pay on time. If you don’t, you could incur large late payment fees.
For example, here’s how much fees you may potentially pay on an RM2,000 purchase if you continuously miss your payments for a period of three months:
| Platform | Interest | Late fees or administration fees per month | Total interest + late/administration fees after three months |
|---|---|---|---|
| Atome | - | RM30 | RM60 |
| myIOU | - | 1% on outstanding amount | RM20 |
| MobyPay | - | RM20 | Account suspended or terminated |
| PAYLATER | - | RM10 per week = RM40 | RM80 |
| PayLater by Grab | - | RM10 | RM20 |
| SPayLater by Shopee | 1.25% a month x 2 months on RM2,000 = RM50 | RM30 | RM110 |
b) The BNPL may call a debt collection agency
If you continuously can’t make your payments, your BNPL platform could appoint a debt collection agency (the same agencies employed by banks when you cannot repay your loans) to collect the debt from you. You can find this information in the terms and conditions pages of each BNPL platform. For example, here’s what’s in Atome’s Deferred Payment Agreement:
If your Account is subject to Suspension for late or rejected payments, you expressly consent to, authorize and instruct us to charge your preferred Payment Method and/or any other designated debit card or credit card to collect the total of any missed Deferred Payment at any time after the due date of the missed Deferred Payment. You agree that we may appoint third party collection agencies to collect any amounts owing to us under this Agreement without further notice to you. [emphasis ours]
c) You may hurt your credit score
If you keep missing your payments, your BNPL platform may report it to credit reporting agencies. For example, here’s what’s in Split’s terms and conditions policy:
[We reserve the right to] notify any credit reporting agency or bureau located in any jurisdiction or any agency or bureau that reports such credit reporting information to any companies, and identify any outstanding debts against your known details to us…
This could hurt your credit score, which makes it harder to apply for home loans, vehicle loans or credit cards in the future. However, not all platforms may report your debt to credit reporting agencies.
Should you Buy Now, Pay Later?
BNPL can be useful if you want to make big purchases without significantly affecting your monthly cash flow. Here are a few situations where it can make sense:
- If you can repay on time.
- If you need to make a necessary or emergency purchase – such as replacing a broken-down fridge – and you want more time to make repayments.
- If you need to take out credit for a necessary purchase, but your credit history isn’t good enough to get a credit card or personal loan.
But if these situations don’t apply, consider if you can delay the purchase until you have enough saved. After all, buying now and paying later means borrowing from your future self – and it can be hard to feel good about a new pair of sneakers or a fancy face wash when you have debt to repay.
This article has been updated on July 11, 2024.
