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How do Zip Pay and Zip Money work?

Last updated on July 18, 2024

In this article, we will focus on two ‘Buy Now Pay Later’ (BNPL) products offered by Zip; Zip Pay and Zip Money. We’ll explain how Zip Pay and Zip Money work and explore whether Zip is a good idea for shoppers. So, if you have questions like “What is Zip Pay and how does it work?” then we’ll have them answered shortly. Let’s zip on, shall we? 

What is Zip?  

Zip, formerly known as Quadpay is a buy-now-pay-later (BNPL) service offered to customers in the United States of America (USA), Australia, and New Zealand. They currently offer two products; Zip Pay and Zip Money. Both products are designed to enable its customers to buy what they need quickly, conveniently and safely. 

Zip’s business model is to get a small fee from the retail merchant, which the merchant pays every time a Zip customer uses their Zip card at the checkout. Zip also receives fees from customers, depending upon what product the customer has and how their repayments have been managed.  

What is Zip Pay?  

Zip Pay is an interest-free online shopping wallet that enables customers to buy now and pay later. Because Zip operates in three territories (USA, Australia and New Zealand), talking about payment fees and wallet limits can get confusing, because the terms differ by territory as do the dollar exchange rates. So, check out the Zip product details to understand the specific terms for your specific region.  

In the meantime, and to give you an idea, Zip Pay is designed to help its customers with everyday spending. For this reason, Zip Pay has relatively low credit limits of between $350 - $2000 depending on the individual and region you live in. Because Zip Pay is intended to help everyday spending, you’re expected to pay down the credit. This is an interesting service with some key benefits:  

  • Its repayments are flexible – They can vary by territory. In the USA, Zip customers can choose a weekly, fortnightly, or monthly schedule, paying it off early without a penalty. 

  • No interest is applied - Every transaction is interest free. 

  • There is a quick approval time – Zip Pay claims that customers normally ‘for minutes’. There are no fees to USA customers for opening the account (Zip calls this ‘establishment fees’).  

How does Zip Pay work? We’ll explore that shortly. First, let’s look at Zip Money so that we can see how Zip Pay and Zip Money differ. 

What is Zip Money? 

Zip Money is designed for larger purchases. For that reason it’s less of a wallet and more a line of credit. How much credit Zip Money will give you is assessed on a personal basis, however it mostly ranges between $1,000 and $5,000 for regular accounts, again depending upon the region you live in. Customers can also apply to specific merchants for a Zip Money card, and these can provide account limits of up to $50,000.  

Zip Money is not interest free, although some territories do offer interest free periods, typically for 3 months across all products and up to 5 years with some retailers.  

Unlike Zip Pay, Zip Money may incur a one-off account set-up fee (which Zip call an ‘establishment fee’) for some credit limits. Customers won’t pay a monthly account fee if they pay their outstanding balance in full, by the due date. 

What is the difference between Zip Pay and Zip Money? 

Comparing Zip Pay and Zip Money can get confusing. They are two separate products designed for two different sets of customers and they have different minimum repayments, fees, and (in Zip Money’s case,) interest rates. How you pay with a Zip card at the checkout can differ too; Zip Pay cards can tap to pay, but that’s not available for Zip Money customers.  

However, what both products share is Zip’s desire for their customers to be able to use the Zip app and Zip cards in many stores as easily and quickly as possible. Convenience is key. Zip encourages this by offering cashback for shopping at specific rewards partners. So, how do Zip Pay and Zip Money differ? 

  • Zip Pay. Everyday spending - With a maximum credit limit of $1000, Zip Pay is designed to help its customers with everyday spending.  

  • Zip Money. Larger purchases - Zip Money offers a line of credit between $1,000 and $5,000 for regular accounts and is designed to help its customers buy large purchases that they can pay for over a longer period of time.  

Other differences include the payment terms and fees charged. Zip Pay is interest free. Zip Money is not interest free, although customers can enjoy some interest free periods. At the time of writing, Zip Money also had a one off establishment fee for setting up the account.  

How does Zip Pay work? 

Zip Pay and Zip Money work in a similar way utilising the Zip app. The payment process is designed to be straight forward and simple.  

1. How to shop online with the Zip app: 

  1. Use the app to find the stores that you intend to use. 
  2. Go to that retailer’s site via the app and select your cart as normal. 
  3. The order summary will explain how the total cost will be broken down into repayments using a simple payment plan table. It will also confirm if there are any fees or charges. Just check that the cart amount matches the payment request.  
  4. Completing the payment is often quick because Zip will autofill the checkout’s payment information.  

2. How to pay in-store with the Zip app: 

  1. Select the in-store tab. 
  2. Enter the total purchase amount. 
  3. Review the payment plan, confirming the amount and payment method to generate a virtual card.  
  4. Click to place the virtual card in your Apple wallet or Google Pay 
  5. Pay with your wallet to complete the purchase.  

3. Is Zip a good idea for shoppers? 

Zip has been designed for a customer base who appreciate the flexibility that it can offer. Whether Zip is a good idea, very much depends upon your own circumstances and buying habits. Weigh the pros and cons below to decide if it’s the right fit for you. 

Pros 

  • Cash-back – Zip Pay and Zip Money currently operate cash-back schemes to incentivise their customers to shop with specific partner retailers who are participating in their cashback scheme.  

  • Free payment rescheduling – Zip are different to many other BNPL lenders who won’t let you change your payment due date. They offer flexible rescheduling, acknowledging that for many customers, switching the payment date can ensure that they make their scheduled payment and avoid any late payment fees. There are limits to how many times a customer can reschedule a month, but these are typically lower than other BNPL providers.  

  • Account pausing – Account pausing is Zip’s way of checking that you don’t get into debt. It’s a simple mechanism. If you miss a payment, Zip will instantly pause your account. And it won’t approve you for any additional orders until your missed payment is complete. Naturally, once you have caught up, your account is reactivated.  

Cons 

  • Instalment fees – An instalment fee is a fee that Zip Money will charge to extend the interest-free period on a purchase that you have made. Whilst the option to extend the interest-free period is good news, charging an instalment fee is essentially interest since it’s added automatically to the total loan amount. It makes your purchase more expensive than if you hadn’t used BNPL. 

  • Payments aren’t suspended with return items – Compared to many other BNPL providers, Zip is unusual in that they don’t suspend your payments whilst a refund is being processed. So, you may continue to make payments for an item even if you have already returned it to the store.  

  • Borrowers can be sent to collections – If your payments are significantly past your due date then Zip may send you to collections. Not all BNPL providers do this, and this kind of collection activity being added to your credit report can hurt your credit score. 

  • BNPL is still a form of debt – Although BNPL is a smart way to break up a purchase whilst taking advantage of a zero-interest offer, it is still a form of debt and a more costly way to purchase items unless the BNPL customer is sure that they can afford the instalments. 

Why do Merchants sign up to Zip? 

With over 12 million customer accounts, it is perhaps not surprising that over 35,000 merchants have signed up to accept Zip payments. What’s in it for them? Well, a few things: 

  • More sales – By accepting Zip, merchants are opening themselves up to a new customer base who may be more tempted to shop with them and help increase the merchant’s sales and order value. 

  • Daily settlement – Zip will settle all accounts daily, and merchants can see all transactions through their Zip portal.  

  • No credit or fraud Risk – Zip takes all the risk for both credit and fraud. Once a transaction is approved, the merchant is guaranteed to be paid.  

  • Easy on-boarding - Zip have deliberately made it easy for merchants to come on board. They aim for no surprises. There are no setup fees, hidden fees, or lock-in contracts. But they do charge a fee per transaction, which reduces if the transaction volume increases.  

Key takeaways 

  • Zip is a buy-now-pay-later (BNPL) service offered to customers in the USA, Australia, and New Zealand. They have over 12 million customer accounts and 35,000 merchants. 

  • BNPL services are also known as ‘Point-of-sale (POS) instalment loans’. They became popular as an e-commerce tactic to reduce cart abandonment and encourage shoppers to make a purchase that the shopper may not have made if they had to pay for the order in one go.  

  • Zip Pay is an interest-free online shopping wallet that enables customers to buy now and pay later. Offering relatively low credit limits of between $350 - $2000, it is designed to help its customers with everyday spending.  

  • Zip Money is designed for larger purchases, and for that reason, it’s less of a wallet and more of a line of credit which can range between $1,000 and $5,000 for regular accounts. 

  • Zip Pay and Zip Money work in a similar way utilising the Zip app. The payment process is designed to be straightforward and simple, whether customers are online with the Zip app or in-store.  

  • Zip has been designed for a customer base who appreciate the flexibility that it can offer. Whether Zip is a good idea, very much depends upon your own circumstances and buying habits.  

  • Merchants are attracted to Zip because Zip’s growing customer base can open themselves to a new customer base. Plus, Zip settles daily, underwrites the credit and fraud risk and does not charge merchants for on-boarding.  

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