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:
- 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, FavePay Later, myIOU, Hoolah, PAYLATER, PayLater by Grab, SPayLater by Shopee and Split.
|Platform||Tenure||Processing fee||Late payment fee|
|Atome||3 months||0%||RM30 per late payment (max RM60 per purchase)|
|FavePay Later||3 months||0%||1.5% of outstanding payable amount per late instalment|
|myIOU||2, 3 or 6 months||0%||RM5 or 1% on outstanding amount per late payment – whichever is higher|
|Hoolah||3 months||0%||RM7.50 to RM75 per late payment|
|PAYLATER||4 months||0%||RM10 for every 7 days of non-payment|
|PayLater by Grab||Pay the following month or 4 months||0%||RM10 account reactivation fee if paying by instalment (max RM30 per purchase)|
|SPayLater by Shopee||Pay at the end of the month or 2, 3 or 6 months||1.25% a month on total order amount||1.5% per month on overdue amount|
|Split||Up to 3 months||0%||RM0|
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.
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.
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