Zip Plus and Zip Money are not halal: both charge interest, 13.70% a year on Zip Plus balances over $1,000 and 25.9% a year on Zip Money after any interest-free period. Afterpay's Pay Monthly product charges interest too. Afterpay Pay in 4 and Zip Pay are different cases: neither charges interest, but Pay in 4 keeps late fees of $10 plus $7, capped at the lower of 25% of the order or $68, and Zip Pay charges a $9.95 monthly account fee on any unpaid balance plus a $7.50 late fee. Most scholars treat a creditor keeping late penalties as riba, so the cautious answer is to avoid both; the permissive view allows Pay in 4 only if you are certain to pay on time.
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How Afterpay Pay in 4 is priced
Afterpay Australia Pty Ltd holds Australian Credit Licence 527911. Its Pay in 4 product splits a purchase into four payments over six weeks: roughly 25% at checkout and three further payments about every two weeks, with Afterpay paying the merchant in full. Its help page says there are no fees when you pay on time and that it does not charge interest on Pay in 4. If you miss a payment on an order of $40 or more, a $10 late fee applies, and if the amount is still unpaid seven days later a further $7 applies, repeating for each missed payment until the cap is reached. For orders under $40 a single late fee of up to 25% of the order applies. Pay in 4 late fees never exceed 25% of the order total or $68 per order, whichever is lower, and the Pay in 4 customer contract describes the product as a low cost credit contract under section 13E of the National Credit Code.
Two related products change the analysis. Afterpay Plus is a $9.99 a month subscription that lets you use Afterpay almost anywhere; it is a fee for a service rather than for credit, but it attaches to the same account. Afterpay Pay Monthly is a different contract altogether: its customer terms state that interest applies to Pay Monthly orders at the annual percentage rate in the schedule, with monthly instalments calculated to cover the credit and the interest. Pay Monthly is an interest-bearing loan and no ruling rescues it.
How Zip Pay, Zip Plus and Zip Money are priced
Credit on all three Zip products is provided by ZipMoney Payments Pty Ltd, Australian Credit Licence 441878. Zip's own fee descriptions are unusually clear, which makes the Shariah analysis straightforward.
| Product | Credit limit | Interest | Monthly account fee | Late fee | Establishment fee |
|---|---|---|---|---|---|
| Zip Pay | Up to $1,000 | None, ever | $9.95, waived if statement balance paid in full by due date | $7.50, charged 7 days after due date | $0 |
| Zip Plus | $2,000 to $20,000 | 13.70% p.a. if month-end balance exceeds $1,000; none at or below $1,000 | $9.95, waived if no balance owing at month end | $15, charged 7 days after due date | Not stated on page fetched |
| Zip Money | $1,000 to $5,000 direct; up to $50,000 via select merchants | 25.9% p.a. standard variable after any interest-free period of up to 5 years | $9.95, waived if balance is $0 at month end | $15, charged 7 days after due date | $0 to $99 depending on limit |
Zip Pay also charges a $2.50 BPAY bill payment fee and a 3% foreign exchange fee on overseas transactions, and repayments start from $10 a week. Zip says it will automatically adjust a Zip Pay repayment schedule to clear the full balance each month so the monthly fee is not charged. That waiver is the whole hinge of the Zip Pay question, discussed below.
What ASIC changed on 10 June 2025
Buy now pay later used to sit outside the National Consumer Credit Protection Act because it charged no interest. The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 ended that. ASIC's Information Sheet 285, issued in January 2025, explains that from 10 June 2025 anyone engaging in credit activities involving buy now pay later contracts must hold an Australian credit licence with the right authorisations and be a member of the Australian Financial Complaints Authority, and that BNPL contracts are now credit contracts under the National Credit Code. The Act created a new category, the low cost credit contract, for BNPL contracts meeting fee and period limits set by regulation, and providers of those contracts can elect a modified form of the responsible lending obligations.
For a Muslim consumer the regulatory change matters in two ways. First, it confirms in law what the scholars already said: BNPL is credit, not a payment service, so the question is the same question asked of any credit contract. Second, MoneySmart warns that BNPL arrangements, late fees and even applications may appear on your credit report and be considered when you apply for a car loan or home finance, which is relevant if you are saving towards a halal home finance application. MoneySmart also notes that lay-by has no account-keeping or late fees.
The scholarly positions on buy now pay later
Three positions cover almost every published fatwa on BNPL. The first treats Pay in 4 as a permissible deferred-payment purchase: you buy goods at the cash price, pay in instalments with no increase, and the merchant, not you, pays Afterpay a fee for the service. On this view the late fee is a conditional penalty you can avoid entirely by paying on time, so using the product while intending and able to pay on time is allowed. The second position holds that a contract in which you agree in advance to pay the creditor more if you pay late is a contract containing riba, the pre-Islamic form in which a debt grew with delay, and that signing such a clause is itself impermissible even if the clause never bites. This is the stricter and more common view among scholars who have looked at Western BNPL.
The third position, drawn from the AAOIFI approach to late payment, allows a penalty clause only where the penalty is donated to charity rather than kept by the creditor, because a creditor who profits from delay is earning riba. Afterpay's and Zip's late fees are revenue to the company, so this position does not rescue them. Our is it halal verdict pages apply the same three-way test to credit cards and personal loans, and the bank account guide covers the related question of transaction accounts.
- Explicit interest at an annual percentage rate is riba on every view: Zip Plus above $1,000, Zip Money after the interest-free period, and Afterpay Pay Monthly.
- A fee that is charged on, or grows with, an outstanding balance is treated as interest in substance by most scholars even when it is called an account fee: Zip Pay's $9.95 falls here unless waived.
- A late fee kept by the creditor is riba on the second and third positions and tolerable only on the first: Afterpay Pay in 4's $10 and $7.
- A flat fee for a service unrelated to the amount or duration of credit, such as a subscription, is a fee not riba, but it does not cleanse the credit contract it sits on.
Afterpay: verdict by product
Pay Monthly: not halal, because interest applies at an annual percentage rate by the contract's own terms. Afterpay Plus: the $9.99 subscription is a service fee, but it only exists to widen use of Pay in 4, so it inherits whatever verdict Pay in 4 receives. Pay in 4: contested. The product charges no interest and no fee to a customer who pays on time, and the merchant bears the cost, which satisfies the first position. Against that, you agree in advance that missing a payment costs $10 then $7, up to $68 per order, and those fees are kept by Afterpay, which the second and third positions treat as a riba clause. Our view is that Pay in 4 should be avoided, and that anyone relying on the permissive view must never carry a missed payment: the moment a late fee is charged, the permissive argument has failed in practice.
Zip: verdict by product
Zip Plus and Zip Money: not halal. Zip Plus charges 13.70% a year on any month-end balance above $1,000 and Zip Money charges 25.9% a year once an interest-free period ends, and both carry $15 late fees. Even a Zip Plus user who stays under $1,000 has signed a contract whose central term is an interest rate. Zip Pay: worse than Afterpay Pay in 4 on the permissive view, because the $9.95 monthly account fee is charged whenever a statement balance is not cleared, which makes it a charge for carrying credit regardless of lateness, plus a $7.50 late fee. The waiver for paying in full each month does not change what the contract is. Our view is that Zip Pay should be avoided, and that the interest-bearing Zip products are not a close call.
Halal alternatives in Australia
The honest alternative to BNPL is the one MoneySmart itself recommends: lay-by, which has no account-keeping or late fees and gives you the goods when you have paid. Beyond that, the tools below do the job BNPL claims to do, which is smoothing a purchase over a few weeks, without a credit contract.
- Lay-by at the retailer: pay in instalments, no fees, collect when paid, and no entry on your credit report.
- A sinking fund in a separate account, which the halal emergency fund guide explains how to build, so that six weeks of instalments become six weeks of saving before purchase.
- A debit card on an account where interest is declined or disposed of, following the is my bank account haram guide.
- The Hejaz Halal Money spending account, reviewed in the Halal Money app guide, for a card that is not attached to a credit line.
- A qard hasan from family, a mosque fund or a community lender, covered in the qard hasan guide for Australia, for a genuine need rather than a purchase.
- No Interest Loans listed on MoneySmart for essential goods, for people on low incomes who would otherwise reach for Zip Money.
Verdict: what a Muslim shopper in Australia should do
Close Zip Plus, Zip Money and Afterpay Pay Monthly accounts; they charge interest and there is no scholarly view that permits them. Treat Zip Pay as a credit account with a fee for carrying a balance and close it too. For Afterpay Pay in 4, follow the stricter view and stop using it; if you follow a scholar who permits it, use it only for purchases you could pay in full today, set the payments to a debit card with the money already in the account, and close the account the first time a late fee appears. Then replace the habit with lay-by or a sinking fund, which cost nothing and leave no mark on the credit file you will need for halal home finance.
Students and new arrivals, who are heavily marketed to by BNPL providers, should read the HECS-HELP indexation discussion in the is HECS-HELP debt halal guide alongside this one, since the same question of whether a charge on a debt is riba runs through both, and our halal banking guide sets out the whole account setup. Facts checked against afterpay.com, zip.co, asic.gov.au and moneysmart.gov.au on 12 September 2026.
Frequently asked questions
Is Afterpay halal?
Afterpay Pay in 4 is contested and Afterpay Pay Monthly is not halal. Pay in 4 charges no interest and no fee if you pay on time, which the permissive view accepts as a deferred-payment purchase, but its contract lets Afterpay keep late fees of $10 plus $7 per missed payment, capped at the lower of 25% or $68 per order, which most scholars treat as a riba clause. Pay Monthly charges interest at an annual percentage rate and is impermissible on every view.
Is Zip Pay halal?
Zip Pay charges no interest but charges a $9.95 monthly account fee whenever the statement balance is not paid in full by the due date, plus a $7.50 late fee seven days after a missed minimum repayment. Because the monthly fee is a charge for carrying a credit balance, most scholars treat it as interest in substance, so Zip Pay should be avoided. Zip Plus and Zip Money charge explicit interest of 13.70% and 25.9% a year and are not halal.
Why are BNPL late fees considered riba?
Because a late fee kept by the creditor makes the debt grow with delay, which is the pre-Islamic riba the Quran prohibits, according to the majority of scholars who have examined BNPL. The AAOIFI approach allows a late penalty only if it is donated to charity, not retained as revenue. Afterpay's $10 and $7 fees and Zip's $7.50 and $15 fees are retained by the companies, so the clause fails that test even though a customer who pays on time never pays it.
Is buy now pay later regulated as credit in Australia?
Yes. Under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, BNPL contracts became credit contracts under the National Credit Code, and from 10 June 2025 providers need an Australian credit licence and AFCA membership, according to ASIC Information Sheet 285. Many BNPL contracts are classed as low cost credit contracts with modified responsible lending rules. MoneySmart warns BNPL use and late fees can appear on your credit report.
Can I use Afterpay if I always pay on time?
On the permissive view, yes: a deferred-payment purchase at the cash price with no interest is allowed, and a late fee you never trigger is said not to taint the contract. On the stricter and more common view, no: agreeing in advance to a penalty kept by the creditor is a riba clause whether or not it is charged. If you rely on the permissive view, pay from money already in your account and close the account if a late fee is ever charged.
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What is the halal alternative to Afterpay and Zip in Australia?
Lay-by is the closest substitute: MoneySmart notes it has no account-keeping or late fees and you collect the goods once paid. A sinking fund in a separate account turns six weeks of instalments into six weeks of saving before purchase. For a genuine need rather than a purchase, a qard hasan from family or a community fund, or a No Interest Loan listed on MoneySmart for essential goods, avoids any credit contract. A spending account such as Hejaz Halal Money keeps the card away from a credit line.
