What Is Buy Now, Pay Later, And Should You Use It?

What Is Buy Now, Pay Later, And Should You Use It?

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:

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  • 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 seven platforms available in Malaysia: Atome, myIOU, Hoolah, PAYLATER, PayLater by Grab, SPayLater by Shopee and Split.

PlatformTenureProcessing feeLate payment fee
Atome3 months0%RM30 per late payment (max RM60 per purchase)
myIOU2, 3 or 6 months0%RM5 or 1% on outstanding amount per late payment - whichever is higher
Hoolah3 months0%RM7.50 to RM75 per late payment
PAYLATER4 months0%RM10 for every 7 days of non-payment
PayLater by GrabPay the following month or 4 months0%RM10 per late payment (max RM30 per purchase)
SPayLater by ShopeePay at the end of the month or 2, 3 or 6 months1.25% a month on total order amount1.5% per month on overdue amount
SplitUp to 3 months0%RM0

1. Atome

atome logo

 

TenureLate payment feeCredit limitMerchants include
3 monthsRM30 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
Atome is a Singapore-based platform that’s one of the largest BNPL players in Asia. It lets you shop at over 2,000+ retailers online and in-store. It supports popular brand names like Zalora and Agoda.

It charges a relatively high penalty of RM30 per late payment, although the maximum late fees you can incur is RM60.

2. myIOU

myiou logo

 

TenureLate payment feeCredit limitMerchants include
2, 3 or 6 monthsRM5 or 1% on outstanding amount per late payment (whichever is higher)RM1,000 to RM10,000Senheng, Drone Hub, Gintell
myIOU offers more flexible tenures compared to other platforms listed here.

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. Hoolah

hoolah logo

 

TenureLate payment feeCredit limitMerchants include
3 monthsDepends on order amount:

RM0 to 99.99 - RM7.50
RM100 to 499.99- RM25
RM500 and above - RM75
Based on user assessmentJD Sports, Zalora, FashionValet, Focus Point
Like Atome, Hoolah is a popular Singapore-based platform that supports a large variety of merchants.

However, its late fees are quite high. If your order amount is RM500 and above, you could be charged RM75 each time you miss your payment, up to a maximum of RM150 per order.

4. PAYLATER

paylater logo

TenureLate payment feeCredit limitMerchants include
4 monthsRM10 for every 7 days of non-paymentBased on user assessmentOppo, Gamer’s Hideout, DJI, DirectD, Metrojaya
PAYLATER (not to be confused with Grab’s PayLater) splits your order into four instalments, paid monthly. It supports several well-known tech brands, such as Oppo and DJI.

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

 

paylater by grab logo

 

TenureLate payment feeCredit limitMerchants include
Pay the following month or 4 monthsRM10 per late payment  (max RM30 per purchase)Based on user assessmentDirectD, Shiseido, Zalora, Hermo, Shein, Machines
Grab’s PayLater offers two modes of repayment. You can either pay in four monthly instalments, or pay the entire amount next month. You only get GrabRewards points when you pay through the latter.

It has relatively low late fees. If you miss a payment, your account will be suspended, and you’ll need to pay RM10 to reactivate it. The maximum amount of late fees you’ll incur is RM30.

6. SPayLater by Shopee

shopee logo

TenureProcessing feesLate payment feeCredit limit
Pay at the end of the month or 2, 3 or 6 months1.25% a month on total order amount1.5% per month on overdue amountRM3,000 or more, based on user assessment
SPayLater is Shopee’s entry into the BNPL marketplace. It offers two ways of repayment. You can pay the entire amount at the end of the month (no fees charged) or pay instalments across two, three or six months (and get charged 1.25% a month).

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 RM187.5 (RM3,000 x 1.25% x 5 months; assuming you pay the first month upfront) in processing fees alone.

Worse still, if you can’t make your payments, you may have to pay 2.75% a month, including the late fees. According to this interest calculator, this is equivalent to an annual interest rate of 38.48%.

7. Split

pay with split logo

TenureLate payment feeCredit limitMerchants include
Up to 3 monthsRM0Based on user assessmentDyson, Switch, Illegear, Todak
Split, Malaysia’s first Shariah-compliant BNPL platform, is currently the only platform on this list that doesn’t charge any late fees.

Split doesn’t disclose your purchase limit before you sign up. Instead, it algorithmically decides to approve a transaction on a case-to-case basis.

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:

PlatformKadar faedahCaj pembayaran lewat setiap bulanJumlah faedah + caj pembayaran lewat selepas tiga bulan
Atome-RM30RM60
FavePay Later-1.5% dari jumlah tunggakanRM30
myIOU-1% dari jumlah tunggakanRM20
Hoolah-RM75RM150
PAYLATER-RM10 seminggu = RM40RM80
PayLater by Grab-RM10RM20
SPayLater by Shopee1.25% sebulan x 2 bulan dari jumlah RM2,000 = RM50RM30RM110
Split-RM0RM0
Senario: pembelian anda bernilai RM2,000 dan anda telah membayar ansuran bulanan yang pertama; kesemua pengiraan hanyalah sekadar contoh

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.

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