Afterpay or Zip? We settle the debate once and for all.

Buy Now, Pay Later payment methods are a great way to budget what you need if you have the money upfront. However, there are hidden catches. Find out which is better, Afterpay or Zip, in our complete guide.

Buy Now, Pay Later (BNPL) digital payment methods are all the rage in Australia. In fact, Roy Morgan reports a whopping 1.95 million Australians used Afterpay, Zip Pay and Zip Money in 2019, up 1.38 million people from the previous 12 month period.

There is no debate whether Afterpay or Zip is more popular than credit cards for young Aussies, but which is the more popular BNPL method? With Christmas fast approaching, we thought we’d settle the debate between the two most popular BNPL services on the market right now.

Feature Photo by Blake Wisz on Unsplash

Afterpay versus Zip Pay & Zip Money for Consumers

Are Afterpay, Zip Pay and Zip Money the same?

While Afterpay, Zip Pay and Zip Money are all Buy Now, Pay Later services, they all operate differently. Zip Pay and Zip Money are both owned by Zip Co Limited, formerly known as Zip Money Payments, but even they operate slightly different to one another.

Each platform has different approval criteria, payment schedules, fee structures and ways they can be used. We go into more detail of each of these below.

Do you have to pay upfront with Afterpay or Zip?

Afterpay allows approved consumers to pay for purchases with businesses signed to their platforms. The payment schedule is set to four fortnightly instalments, with the first instalment only required at the time of purchase if being completed in-store, which counts as the first payment being complete. Otherwise, the first payment is not required until one fortnight’s time.

Neither Zip Pay or Zip Money require any upfront payment. With Zip accounts, you can set a weekly, fortnightly or monthly payment schedule, with the minimum repayment depending on your limit.

How much are Zip Pay, Zip Money and Afterpay fees?

Afterpay charges no interest or fees, other than a late fee. However, they do advise their late fees are capped at 25% of the purchase price, but will never be more than $68. They make their money from taking a percentage of the sale from the business. You do have until 11:00pm AEST the next day to make a payment, if missed, to avoid receiving a late fee.

Zip Pay is also an interest-free platform, while Zip Money charges 19.9% per annum, but only after your interest-free period (a minimum of 3 months) has ended. On the other hand, both Zip Pay and Zip Money incur a $6 monthly account-keeping fee, which is waived if you have a $0 balance. 

As for late fees on Zip, you’re looking at a $5 late fee if you miss a payment on your Zip Pay account, and $15 if you miss a Zip Money repayment. There is also a $5 dishonour fee for Zip Money accounts, and both platforms incur a 1.50% processing fee if you pay your bills with them.

Only Zip Money incurs an establishment fee, but this is between $0 to $299 and depends on your credit limit.

Do Afterpay and Zip Pay do credit checks?

Some Buy Now, Pay Later services will run credit checks when you apply to ensure you’re known for being responsible with your finances. So, if they do, then the service may impact your credit score.

Afterpay does have in their guidelines that they may run a credit check on you, but normally they won’t. Zip Pay and Zip Money will check your credit report.

Where can you use Afterpay, Zip Pay and Zip Money?

Afterpay can be used at hundreds of Australian retailers and service provider locations both online and in-store. Some retailers will have a minimum limit and may only accept online Afterpay order, so it’s best to check before relying on the payment method.

When you use Afterpay in-store, your first payment will be deducted immediately from your nominated bank account. 

For Zip Co accounts, Zip Pay is normally recommended for small purchases with no interest, while Zip Money is a line of credit for larger payments of $1,000 or more. Keeping this in mind will help you manage your finances and get what you need.

Afterpay versus Zip Pay & Zip Money for Businesses

Will offering Buy Now, Pay Later services increase sales?

Zip Co reports businesses offering Buy Now, Pay Later payment methods see an average increase in sales by up to 30%, order value by up to 70% and purchase rate up by 80%. So, yes, signing up to be a merchant of these services can help your business, but there are fees you need to know about—as they are businesses themselves so do need to turn a profit.

Are businesses charged for using Afterpay or Zip?

A business offering Afterpay will incur a 30% transaction fee, as well as a 4 to 5% transaction commission fee, or as agreed in your contract with them. If you sign with Zip Money or Zip Pay, you’ll be charged a 15% transaction fee, as well as a 2 to 4% transaction commission fee. These were the fees as of 28 November, 2018, and may change.

What happens if someone doesn’t pay back Afterpay or Zip?

When someone buys something using a BNPL payment method, the service pays the company and takes on the credit line themselves. So, if a person defaults on a payment, the business is still paid and the service does the chasing to recoup their loss.

The Verdict: Afterpay or Zip?

Afterpay and Zip are the leading Buy Now, Pay Later payment methods, and it really comes down to preference. For example, if you have a bad credit rating, you’ll be more likely to lean towards Afterpay as they don’t often do credit checks, but if you’re wanting to do large purchases, ZipMoney may be your best option.

While these services can be handy, always remember to live within your means and keep your budget. If you do use them, ensure you meet your minimum repayments and pay them off sooner rather than later, if you have the funds to do so. Where possible, pay for your goods with actual money, rather than a credit line.

Sarah Russo

UX Content Writer

Sarah Russo is a UX Content Writer at Localsearch with a decade of experience in traditional and digital marketing. She has written for and assisted in the social media and marketing strategies for many different industries, including real estate, medical, health and fitness, trades and beauty. When she isn’t nose deep in data, SEO research or her content strategy, Sarah is a gym junkie, foodie and gamer with a brain full of random facts that come in handy far more often than you would think. As a digital marketing all-rounder and lifestyle specialist, her articles provide insight into marketing, advertising and branding for small businesses on the Localsearch Business Blog, as well as some handy lifestyle tips on the Localsearch Blog.