Zip Review - How Does Zip Work?
We review Zip, the 'buy now and pay in four installments' method of payment method increasingly offered at retails and online.
Updated 27 July 2026
Summary
Know this first - understand the Zip 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:
- Promising interest-free terms and a 6 week repayment period, Zip's payment method is primarily offered by clothing retailers and lifestyle products and services. But, is it a good deal, and should you use it?
- We've put together a guide to Zip 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 Zip effectively. We cover:
- How does Zip work, and where can I use it?
- Who is Zip for?
- Why do so many retailers offer Zip?
- Zip vs Credit Cards and Store Cards
- Zip - 9 Must Know Facts
- Tips for making the most out of Zip
- Conclusion
Know this first - understand the Zip 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.
- If you don’t make the repayment within 7 days, you will be charged a further $10 for every week the repayment remains outstanding.
- The cap of late fees in one purchase is $40, but you may be liable for debt collection costs if Zip passes on your debt.
How does Zip work, and where can I use it?
Signing Up and Getting Approved
Sign up is online-only, and applicants need to enter in the following details:
Applicants need to:
It's unknown what percentage of new applicants get declined, as Zip does not disclose this.
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 Zip does not disclose this.
Retailers
Retailers accepting Zip are primarily online, with a strong focus on larger retailers and those operating in the fashion industry. Examples include of general retailers include The Warehouse, Torpedo7, Warehouse Stationary, 1-day.co.nz and 300+ other retailers.
Retailers accepting Zip are primarily online, with a strong focus on larger retailers and those operating in the fashion industry. Examples include of general retailers include The Warehouse, Torpedo7, Warehouse Stationary, 1-day.co.nz and 300+ other retailers.
Making a Purchase
Zip offers two ways to make a purchase:
Once you have decided on your purchase, you will be asked for pay 25% of the value of the items or service upfront, and this can be paid by debit or credit card. You'll then be shown a repayment schedule, which requires three further 25% payments over six weeks, i.e. one every fortnight.
Zip offers two ways to make a purchase:
- On the Zip instore website: The website lets you search for a physical retailer (i.e. a store) and generate a voucher for the amount you wish to spend. You can then visit the store and purchase goods or services up to the maximum value of the voucher.
- Online: Participating retailers will indicate they offer Zip on their website and the repayment amounts for your basket of items should you purchase them.
Once you have decided on your purchase, you will be asked for pay 25% of the value of the items or service upfront, and this can be paid by debit or credit card. You'll then be shown a repayment schedule, which requires three further 25% payments over six weeks, i.e. one every fortnight.
Repayments and Reminders
Zip only accepts Mastercard and Visa debit cards and credit cards, and these MUST have been issued by a New Zealand bank. Zip 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 Zip website will show the details.
Zip 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 Zip website. 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.
Zip only accepts Mastercard and Visa debit cards and credit cards, and these MUST have been issued by a New Zealand bank. Zip 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 Zip website will show the details.
Zip 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 Zip website. 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. The cap of late fees in one purchase is $40, but you may be liable for debt collection costs if Zip passes on your debt.
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. The cap of late fees in one purchase is $40, but you may be liable for debt collection costs if Zip passes on your debt.
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 Zip 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;
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 Zip 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;
- If you have already made a payment or two, your repayment schedule will adjust accordingly.
- However, your fortnightly 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.
- 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).
You may be declined from making purchases at any time
Just because you have a Zip account doesn't mean you can buy whatever you want; we would expect Zip to decline hundreds of transactions every week for many reasons, including:
Just because you have a Zip account doesn't mean you can buy whatever you want; we would expect Zip to decline hundreds of transactions every week for many reasons, including:
- The length of time you have been using Zip - new purchase approvals are much tighter in the first 6 weeks, and you will be able to make a second purchase using Zip once you've paid your second installment on your first purchase.
- The total number of orders and/or the outstanding amount you have to repay - Zip probably likes it if there is a history early repayments
- The value of the order you are trying to place - Zip has a limit of $1,000 (although it states customers with a proven history may be able to see this increased).
- A history of late payments - Zip is clear in that late payments not only attract penalties, they also lower the prospects of being approved for a new purchase.
​Who is Zip for?
We see Zip 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 Zip could provide an alternative short-term credit solution that doesn't aggressively leave customers in debt.
Maria - A typical example: Maria works part-time and studies at university. She has $200 in her bank account and is paid $200 a week by her employer. She buys $200 worth of clothes using Zip knowing she’ll pay $50 a fortnight for the next 6 weeks after she makes an initial $50 payment. She believes that the $150 balance owing will be more than covered by her weekly income. She keeps the $150 in her bank account knowing she can make the $50 Zip repayments when she gets paid. There are many people like Maria.
The attraction of Zip is the ease of paying off a purchase without incurring interest charges like a credit card would charge if you’re late.
A growing number of people, and especially 'millennials', are wary of debt and prefer to make repayments in installments rather than spend the entire balance upfront, or face one potentially sizable end-of-month bill from a credit card.
Maria - A typical example: Maria works part-time and studies at university. She has $200 in her bank account and is paid $200 a week by her employer. She buys $200 worth of clothes using Zip knowing she’ll pay $50 a fortnight for the next 6 weeks after she makes an initial $50 payment. She believes that the $150 balance owing will be more than covered by her weekly income. She keeps the $150 in her bank account knowing she can make the $50 Zip repayments when she gets paid. There are many people like Maria.
The attraction of Zip is the ease of paying off a purchase without incurring interest charges like a credit card would charge if you’re late.
A growing number of people, and especially 'millennials', are wary of debt and prefer to make repayments in installments rather than spend the entire balance upfront, or face one potentially sizable end-of-month bill from a credit card.
​Why do so many retailers offer Zip?
Retailers like Zip for many reasons.
Zip 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 Zip (and its pay-by-installment rivals such as Afterpay, Oxipay and Laybuy) dominates over conventional payment options.
- Firstly, for online shopping, retailers offering Zip 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 and a one-off upfront payment.
- Secondly, shops and online retailers already have to pay credit card companies a fee of a purchase. Like a credit card company, Zip charges retailers to offer their service (we estimate this at around 5% of the purchase price), as they cover the cost of purchase. The benefits of Zip 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 Zip offering a no-interest-ever payment plan, retailers will attract more customers and increased turnover will subsidise the Zip fee.
Zip 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 Zip (and its pay-by-installment rivals such as Afterpay, Oxipay and Laybuy) dominates over conventional payment options.
Zip vs Credit Cards and Store Cards
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 Zip.
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. Zip instead forces shoppers to understand the fortnightly 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 Zip 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. Zip, 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.
Zip 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, as well as annual card fees.
How is Zip different from a credit card?
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. Zip instead forces shoppers to understand the fortnightly 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 Zip 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. Zip, 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.
Zip 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, as well as annual card fees.
How is Zip different from a credit card?
- The is no annual account fee when using Zip, whereas most credit cards charge a regular account fee
- A Zip purchase doesn’t charge interest if you default
- You have a total of 42 days to repay but you'll need to make regular fortnightly payment of 25% of the purchase price over 6 weeks, as well as pay 25% 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.
- Zip caps its late fees at $40 per order, whereas 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. Zip makes it clear that after 5 weeks of any payment remaining unpaid, your balance will be referred to a debt collector and your credit history affected.
- Zip 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.
- You can use a credit card as long as you have the available balance, whereas Zip purchases may be declined because their algorithm decided so. Zip advises that if you have a history of late payments then future purchase limits will decrease. As an example, if you were late on a recent payment, your limit at a retailer may drop from $500 to $300.
- If you don’t make Zip 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.
Zip - 9 Must Know Facts
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Zip can be approved instantly, whereas credit card applications can take weeksZip gives applicants the option of being instantly approved with a name, address, date of birth and driver licence ID being required. The purchase limit for a first purchase is unclear - we estimate it somewhere between $400 and $750. At any time, there is a maximum purchase limit of $1,000. Contrasted to a credit card application where you have to apply, wait for it to be assessed, wait for the credit card to be issued and delivered etc., Zip is relatively near-instant.
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​Zip isn’t accepted everywhere, so it's not like a credit cardZip is limited to 350+ retailers, most of which are online. As a result, Zip isn’t an alternative to EFTPOS or credit cards. Instead, it acts as a payment method if you are shopping for specific items.
And while partners include The Warehouse, Torpedo7 and 3 Wise Men, these and 80% of all Zip retailers are "online only" meaning you can't use Zip in their physical stores unless it expressly allows it. |
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​You can build positive credit history if you use ZipZip does supply evidence of good repayment behaviour to Centrix, a credit rating agency, for credit scoring. However, their fine print is clear in that they do reserve the right to perform credit checks and to report negative activity on your account to credit rating agencies. So if you do miss a payment, not only will be charged a fee but you may have this noted in your credit history.
Conversely, a good repayment history can result in an improved credit score. |
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​Many retailers are aimed at young womenZip is usually offered as a payment option for retailers selling clothing, makeup and jewelry. There is a risk that the biggest users will be consumerist people chasing the ‘latest’ stuff. Impulse buying could lead users to over-extend themselves, so proper money management is essential.
Zip has advised that the average age of their customer is 37 years old. |
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​The more purchases you make, the more repayments you’ll need to manageYou could get into financial strife by having too many repayments at once. This will arise if you’ve made multiple purchases with different shops that overlap, meaning repayments will come out of your bank account continually. You will need to be able to plan your repayments and manage your money – miss one, and you’ll be charged a late fee, but you’ll also need to make sure you can meet all the other payment. Financial planning is essential for anyone regularly using Zip.
Unlike many credit cards, Zip doesn’t let you spend up large before you have proven you can repay what you have already purchased. Most customers start off with a $500 to 1,000 limit, but it can be lower. |
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​You’ll never be charged interest – if you’re late in paying, you’ll be charged fees (capped at $40)Zip is not legally allowed to charge interest. They make money from your purchase by charging the merchant a fee for using the service, as well as late fees for anyone who doesn’t make a repayment on time.
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​Retailers are not allowed to charge you more if you use ZipA retailer is not permitted to charge a ‘Zip service fee’ or similar. Zip is merely a payment option, and does not permit partners to offer an 'Zip price' that is more than what anyone else would pay the retailer.
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Zip isn’t really like layby – you pay in installments after you’ve bought somethingThere is some confusion among New Zealanders that Zip offers a layby service, where you pay installments in advance of receiving the goods or services. Zip is the reverse of traditional layby - you pay 25% during the purchase and the remaining 75% over three fortnights.
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Making Zip repayments with a credit card can lead to debt problemsAs Zip accepts credit cards as a method of payment, there is a risk that the debt you incur is not paid off. Zip purchases can therefore become credit card debt at a later date if it is not promptly paid off.
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​Tips for making the most out of Zip
Your success with Zip 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 Zip, we've listed 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 two weeks and one day after purchase date, usually around 10am - 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 Zip 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 Zip, it’s likely to be the best option.
3. Make sure you know you will be able to make the repayments – because Zip 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 - Zip 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 Zip commitments may be compromised.
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 two weeks and one day after purchase date, usually around 10am - 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 Zip 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 Zip, it’s likely to be the best option.
3. Make sure you know you will be able to make the repayments – because Zip 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 - Zip 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 Zip commitments may be compromised.
We don't know where Zip makes most of its money - from merchants or consumers
New Zealand company law does not require Zip to disclose their financial statements, so we cannot state what percentage of their revenue comes from merchant fees and what comes from late fee income. We do not know the default rate on repayments either.
Conclusion: Zip
- Zip is here to stay, and this means more and more retailers will offer the payment option.
- If you budget carefully, plan purchases and Zip continues to closely assess your credit risk, the payment option can work to your advantage.
- We encourage shopping around for a deal - just because one retailer offers Zip doesn't mean it's the overall best deal.
- Zip, like any payment method, gives shoppers full consumer rights - if you return items, you will receive a refund, although this may not processed on the same day.
- Zip is an excellent alternative to using a credit card for non-essential purchases. A credit card may seem easier and more flexible, but the billing process is less easier to manage. Zip approves you per-purchase, although overall responsibility to make the repayments falls on the customer.
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