• Donnelle Brooks

Everything You Need To Know About Step Pay: A Review

Step Pay is the latest offering from Commonwealth bank or Commbank. So, what happened to their partnership with Buy Now Pay Later giant Klarna? We'll take a look at their brand new service, tell you the pros and cons and delve a little into the demise of the banking giant's relationship with the pink Swedish fintech.


Overview:

What is StepPay?

How does StepPay work?

Can you do StepPay weekly or monthly?

Can you choose what day StepPay comes out?

Using StepPay for purchases under $100

StepPay vs Klarna

How is StepPay different to Klarna?

How is StepPay different to Afterpay?

What is the StepPay credit limit?

What fees does StepPay charge?

StepPay eligibility

How do I apply for StepPay?

How much do I have to pay upfront with StepPay?

Can I pay back StepPay sooner?

Will StepPay check my credit score?

Can I pay my bills with StepPay?

The Bottom Line


What is StepPay?

StepPay is the latest addition to the Commonwealth Bank range of services. It allows you to break your purchases into 4 fortnightly instalments. Does this sounds familiar? That's because it closely models itself after Afterpay, the Buy Now Pay Later giant that started this whole shebang. So how is it different? Let's look a little deeper


How does StepPay work?

StepPay can be added pretty easily to your Commbank app, so in that way it's pretty convenient if you are already a Commonwealth customer. When choosing StepPay as your payment method, purchases over $100 will automatically be split into 4 fortnightly payments.


Can you do StepPay weekly or monthly?

No, the only payment option for StepPay is fortnightly instalments. This, compared to Zip Pay, which lets you choose weekly, monthly or fortnightly, is a real downside to the app. Some people get paid at different intervals, so not letting them choose when they are going to pay is inconvenient. Which at the risk of sounding paranoid, leads me to believe that this service is more about StepPay revenue than it is a service to the consumer.


Can you choose what day StepPay comes out?

No, the payment will come out automatically on the day you make the purchase, and on that day for 3 subsequent fortnights. This is rather inconvenient and not as flexible as Bundll or ZipPay, which let you choose.


Using StepPay for purchases under $100

When you choose StepPay for purchases under $100, the full amount immediately comes out of your linked account. This might be inconvenient if you are used to using Afterpay to split up smaller purchases, or if you are short of cash before payday. One of the main strengths of these services is as a budgeting tool, so not being able to split up purchases under $100 is a big drawback.


StepPay vs Klarna

StepPay is a surprise release from Commbank, who only recently partnered with Klarna to enter the Buy Now Pay Later space. So, why did they bother, when they already have a horse in the race? As the first big bank to release a Buy Now Pay Later service, they are obviously trying to jump on this ever growing trend. CEO Matt Komryn has outright said that StepPay will compete directly with Klarna.


How is StepPay different to Klarna?

StepPay allows you to connect directly to your Commbank app, and comes with a digital wallet that functions similarly to Google Pay. The convenience of having your Buy Now Pay Later service with your pre existing bank is the main difference.


How is StepPay different to Afterpay?

StepPay only has a credit limit up to $1000 and can't be used on purchases less than $100. So in a fight between Afterpay and StepPay, Afterpay wins. You might choose StepPay if you are already a Commbank customer, as the application process would be smoother. We'll give them that! If you want to read my review on other Buy Now Pay Later Services, head here.


What is the StepPay credit limit?

The StepPay credit limit is $1000 maximum. They have hinted that this may increase, although there is no firm commitment on this. Further limiting the functionality is the inability to split up payments under $100.


What fees does StepPay charge?

StepPay does not charge interest or account keeping fees. They charge late fees if you miss a payment. These are capped at:

  • 1 late fee per instalment

  • 2 late fees per purchase

  • 1 late fee per day

  • 12 late fees per year

This actually seems pretty fair. However, on a purchase of $100, you are capped at $20 late fees, which is about the same as a credit card. That is only if you miss your repayments though. The maximum fees you will pay per year is $120, which is not bad for access to revolving credit. You know what is better than that though? A big fat savings account.


StepPay eligibility

In order to be eligible for StepPay, you have to be a Commbank customer. Luckily, they have 15.9million of those Australia wide. You have to be 18, have an everyday account and have your salary deposited into that account. You will also be subject to a credit check, so if you have a bad credit history or recent defaults you may not be approved. Just to recap:


Eligibility requirements

  • Have a Commbank everyday account

  • Have your salary paid into that account

  • Have no recent defaults

  • Be over 18

  • Have the Commbank app on your phone

This is a lot more extensive requirements than most Buy Now Pay Later services. It's almost like Commbank knows that this market is risky for lenders!


How do I apply for StepPay?

To apply for StepPay, open your Commbank app and click the For You tab in the bottom right corner. Then in the top left click Products and Services. A menu will appear, then click Buy Now Pay Later. It will prompt you to apply and you can go from there.


How much do I have to pay upfront with StepPay?

With StepPay you pay 25% upfront, then the rest over three fortnightly instalments.


Can I pay StepPay off sooner?

Yes, you can pay off your balance anytime you want. Most banks won't say no if you want to pay them off sooner, unless they are making interest off the loan. This is why many car loans tend to be over 7 years with penalties to paying off sooner than that - to maximise interest.


Will StepPay check my credit score?

Yes. As one of the big 4 banks, Commonwealth bank is not into risk. Your application will be subject to a credit check, and depending on your credit score you may not be approved for the full $1000 credit limit


Can I pay my bills with StepPay?

Yes, you can organise for regular bills to come out of your StepPay account. This is a pretty handy feature as you could split a large bill into smaller payments. However, that could also put you into murky territory. If you for instance use StepPay to split your monthly car payment into 4 fortnightly instalments, that could catch up with you quickly. No one from Commonwealth bank was available to tell me whether or not it was possible to use StepPay in this way - so beware.


The Bottom Line

With the biggest bank in Australia entering the race, Buy Now Pay Later is here to stay. Whilst StepPay isn't as strong an offering as ZipPay or Bundll, the convenience of having it hooked to your internet banking app is undeniable in terms of application and repayments. However, the door swings both ways, as it is also more convenient for Commbank to collect any money you owe.I will always remember a very quirky regular substitute teacher at my high school, Dr.Allen. He gave me two excellent pieces of advice. 1 - never stick anything in your ear that is smaller than your elbow. And 2 - Caveat Emptor - Let the buyer beware!



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