LayBuy has been quietly growing retailer partners and customers since its launch in April 2017, promising interest-free terms and a 6 week repayment period to anyone who uses its service. 

But, is LayBuy a good deal, and should you use it?

We've put together a guide to LayBuy to explain how the payment method works, the benefits and pitfalls of using it, a comparison to credit cards and store cards, as well as essential 'must-know' facts and tips for using LayBuy effectively. 

This Guide covers:

• How does LayBuy work, and where can I use it?
• Who is LayBuy for?
• Why do so many retailers offer LayBuy?
• LayBuy vs Credit Cards and Store Cards
• LayBuy- 10 Must Know Facts
• ​Tips for making the most out of LayBuy
• Conclusion

Know this first - understand the late fees per purchase
If you don’t have sufficient funds to make a payment and you miss a repayment on the day its due, you will be charged:

• An initial $10 penalty for missing the payment date
• If you don’t make the repayment within 7 days, you will be charged a further $10 for every week the repayment remains outstanding.
• Outstanding fees are capped at $60. 

Signing Up and Getting Approved
Sign up is online-only, and applicants need to enter in the following details:

• Full name
• Date of birth
• Address
• Driver Licence number (if not available, a passport page scan is required)

Applicants need to:

• Be living in New Zealand
• Be holding a New Zealand-registered debit or credit card (Visa or Mastercard)
• Have reasonable credit history

It's unknown what percentage of new applicants get declined, as LayBuy does not disclose this. ​

Retailers
Retailers are both in-store and online, with the majority being in the fashion industry. Examples include Smiths City, Stirling Sports, Amazon and 1,000+ other retailers. 

Making a Purchase
LayBuy offers two ways to make a purchase:

1. In Stores: Participating retailers are listed on the LayBuy website; providing your phone number at the counter prompts a payment schedule for the purchase, and the purchase is completed when the customer clicks "Pay Now".
2. Online: Participating retailers will indicate they offer LayBuy on their website, and once a basket of goods is at the checkout, selecting LayBuy as a payment method will show the six weekly repayment amounts. 

In both situations, online or in-store, you will be asked for pay 1/6 of the value of the items or service upfront, and this can be paid by debit or credit card. The five further 1/6 payments due over five weeks will be charged to your debit or credit card on the same day every week - LayBuy stipulates clearly that you cannot change your payment day. 

Helpfully, Laybuy allows customers to choose the payment day prior to placing their order. This allows customers to align a repayment schedule to their day of employment payment.

Repayments and Reminders
LayBuy only accepts Mastercard and Visa credit and debit cards, but these MUST have been issued by a New Zealand bank. LayBuy does not accept bank transfers, automatic payments or direct debits. 

You can find the scheduled payment dates on the purchase confirmation email which is sent when an order is approved. If you don’t have the email, logging in to the LayBuy website will show the details. 

LayBuy send a series of reminders so that you make sure there's money in your account for the direct debit to clear. With regular payments, there is a clear, set, standard and achievable endpoint – in just 6 weeks and your purchases can be paid for. Contrast this to a credit card which rolls over with a 2%-5% minimum repayment.

Payment will automatically be taken from your preferred card on the scheduled payment date, and if this card fails, any other card you have stored the details of will be charged. If this fails, a late fee will be applied (see below). 
If you want to make a payment before the due date, you can do this manually via the website or app. You can make as many early repayments as you want, and if they are successful, the automatic payment will no longer be processed on the original scheduled date.

Late Fees and Outstanding Balance Penalties
If you don’t have sufficient funds to make a payment and you miss a repayment on the day its due, you will be charged an initial $10 penalty. If you don’t make the repayment within 7 days, you will be charged a further $10 for every week the repayment remains outstanding. Outstanding fees are capped at $60. 

Returns, Refunds and Repayment Adjustments
You have the same consumer rights to return items no matter how you paid for them. If you decide to return one item or the entire purchase, once the retailer has accepted your returns, your LayBuy payment plan is adjusted to reflect the new total order value. But it's important to know that repayment amounts may not change right away;

1. If you have already made a payment or two, your repayment schedule will adjust accordingly.
2. However, your weekly repayments won’t be reduced - instead, you may see the payment due next is still at full value, while the final payment(s) reduces to $0.
3. If you were due a cash refund, as soon as the retailer accepts your return it can take up to 5-7 business days for the money to show up on your account (this depends on the processing time of your bank which credits the funds to your card).
4. For example, if you made a $180 purchase using Laybuy (i.e. 6 instalments of $30 a week) and want to return items worth $100. Once the Merchant notifies us that the return has been approved, we cancel your 4th, 5th and 6th payments of $30, and amend your 4th payment to $20.

You may be declined from making purchases at any time
Just because you have a LayBuy account doesn't mean you can buy whatever you want. Thousands of transactions are declined every week, which may be due to:

• Insufficient balance - LayBuy gives a set dollar limit, for example, $200. If you then wanted to make a purchase of $360, you would need to pay $160 upfront and the balance of $200 would be split between 5 payments of $40. 
• The length of time you have been using LayBuy - new purchase approvals are much tighter in the first 6 weeks
• The total number of orders and/or the outstanding amount you have to repay - We believe LayBuy will favour customers who have made early repayments
• The value of the order you are trying to place - as mentioned above, LayBuy will only let you spend to your limit unless an upfront payment is made to cover the difference.

We see LayBuy as an easy way for the non-financially minded to buy things without getting trapped in long-term credit card debt. However, a growing number of young people are adverse to credit cards and store finance, meaning LayBuy could provide an alternative short-term credit solution that doesn't aggressively leave customers in debt.

Take Claire. She works part-time and studies at university. She has $250 in her bank account and is paid $200 a week by her employer. She buys $180 worth of clothes using LayBuy knowing she’ll pay $30 a week for the next 5 weeks after she makes an initial $30 payment. She believes that the $150 balance owing will be more than covered by her weekly income. She keeps the $170 in her bank account knowing she can make the $30 LayBuy repayments when she gets paid. There are many people like Claire.

The attraction of LayBuy is the ease of paying off a purchase without incurring interest charges like a credit card would charge if you’re late.

Millennials, we we expect to be the majority of LayBuy's customers, generally prefer to make repayments in installments than spend the entire balance upfront, or face an end-of-month bill from a credit card. 

Retailers like LayBuy for many reasons. 

• Firstly, for online shopping, retailers offering LayBuy see fewer customers abandoning their cart at the checkout because the upfront cost can be spread out over 6 weeks which makes it more affordable. 
• Secondly, shops and online retailers already have to pay credit card companies a fee of a purchase. Like a credit card company, LayBuy charges retailers to offer their service (4%-10%), as they cover the cost of purchase. The benefits of LayBuy for a retailer is that it brings a new group of people who may otherwise not be willing or able to make a purchase. 
• Thirdly, there is a theory that with LayBuy offering a no-interest-ever payment plan, retailers will attract more customers and increased turnover will subsidise the LayBuy fee.

LayBuy has many customers who base their purchasing decision on the smaller repayment number, not the upfront cost. This perhaps is a new way of looking at shopping, and one that LayBuy (and its pay-by-installment rivals Afterpay, Oxipay and PartPay) dominates over conventional payment options.

​Credit cards, store cards and long-term finance cards are designed to build up debt. Our guide to how credit card work explains the mechanics in more detail. Compared to cards, there is a lower chance of building up debt with LayBuy.

​Many people get into trouble with a credit card because it’s more difficult to keep track of purchases. Because credit cards are accepted nearly everywhere, they can easily be used for coffees, a night out, an indulgent purchase alongside routine expenses. LayBuy instead forces shoppers to understand the weekly repayment terms upfront, and a series of follow-ups (see below) train the customer to make on-time repayments. 

Credit card and other long-term finance companies, on the other hand, make a lot of money when bills rollover as interest is charged which can compound leading to a debt problems. Furthermore, credit card minimum repayments range between 2-5% for a bill, whereas LayBuy requires 100% of the balance owed to be repaid after 6 weeks.

The use (or misuse) of credit cards and similar finance options have become so commonplace that a significant proportion of New Zealanders don’t pay their balances off after one month, and quickly incur interest. As long as you make the minimum monthly payment, the card-issuer won’t complain. You can also re-spend the money you’ve just paid off. LayBuy, in contrast, requires you to apply to make a new purchase through its platform and sends you a series of reminders and follows up for repayment well before the balance is due. 

LayBuy isn't like other 'interest free' finance options such GEM Visa and Q Card, where such companies offer '0% interest and zero repayments' knowing that if you don’t make any voluntary repayments before the free interest period ends, you will be smashed with a lot of interest charges at the end. 

​How is LayBuy different from a credit card?

• The is no annual account fee when using LayBuy, whereas most credit cards charge a regular account fee
• A LayBuy purchase doesn’t charge interest if you default
• You have a total of 42 days to repay but you'll need to make regular weekly payment of 1/6 of the purchase price over the next 5 weeks, as well as pay 1/6 of the purchase upfront. Credit cards can offer up to 45 to 55 days of interest-free terms on new purchases, with the balance due in full at the end of the 45/55 days.
• LayBuy does not cap its late payment fees; a credit card will charge you 15%-30% interest per year and this can be for as long as it takes you to pay it off.
• LayBuy can be approved instantly, whereas with a credit card you’ll need to apply, be credit checked and then wait for approval which can take weeks.
•  If you don’t make LayBuy repayments, your account can be suspended until the balances owed are paid. A credit card is similar, but it’s easier to make repayments given 2% to 5% is often the minimum balance owed. ​​

Your success with LayBuy will depend on how you use it. Just because you are approved for a purchase doesn't mean you will always have the money to make the repayments. If you decide to use LayBuy, here are some helpful tips:

1. Plan your purchase day - make purchases on your payday or 1-2 days after payday when you know money regularly comes into your bank account. This way you won’t be caught out with ‘insufficient funds’ and will always avoid any late fees. Repayments occur exactly every week after purchase date - its less difficult and budget when you have 1 to 2 repayment days than 8 to 14. 

2. Shop around for the best price on an item – don’t assume that a LayBuy retailer offers the lowest price. Compare retailers to get the best deal. If the retailer you pick already has the lowest price you can find, and they offer LayBuy, it’s likely to be the best option. 

3. Make sure you know you will be able to make the repayments – because LayBuy takes direct debits, not budgeting could mean your bank account is cleaned out leaving no money for regular bills and food. 

4. Have some 'rainy day' money set aside - LayBuy won't work if you currently need to pay for a big purchase and don't have another means of credit. If possible, set aside a sum of money that could pay for a $500 or $1,000 purchase. If something unexpected comes up and you find yourself short of money due to any reason, your LayBuy commitments may be compromised. 

5. Use a debit card for making repayments - using a debit card means you're repaying your purchases with money you have. If you use a credit card, this delays the actual repayment and you could end up paying interest on the items if you can't pay off your bill at the end of the month.