Buy Now Pay Later (BNPL) services are becoming increasingly more popular. If you haven’t used one of these
services before it essentially allows you to receive the goods or services today, and pay for it in later instalments.
Here we look at how people are using this service and some key factors to be aware of to ensure it doesn’t
negatively impact your financial situation.
Gone are the days of putting an item on layby and patiently waiting as you chip away at the repayments over time.
Thanks to BNPL services, such as AfterPay, we no longer have to wait for the items, and even services, that we want.
Offering convenience and helping manage cash-flow, BNPL services are understandably popular among Australians,
with new competitors still entering the market to fulfil demand.
What are people buying?
Almost anything! The range of products available on BNPL is growing, from home essentials like groceries or
appliances to luxuries like cosmetic dental work.
While BNPL services offer many benefits, it’s important to be conscious of the impact that delaying payments could
have on your finances, such as appearing on your credit report, which can impact your ability to borrow money in the
future.
The risks associated with Buy Now Pay Later
- Lack of regulation
Anyone is able to use BNPL services, whereas credit card providers have strict regulations as to who
they can issue a credit card to. Since they don’t charge interest, BNPL organisations aren’t regulated in
the same way as a credit card provider. Long-term this means that due to no regulations, it is easy to
wind up in great debt ultimately affecting credit rankings. - Over-commitment
The lack of immediate full payment means it is easy for people to make multiple purchases without
considering the overall financial impact it may have on them. One in four Australians admits to regretting
a BNPL purchase or hiding it from friends or family. - Fees
When using a BNPL service, it is important to make timely repayments or risk being charged a relatively
significant fee. For example, a $10 Afterpay late fee is equivalent to paying 6.67% interest on a debt of
$150. - Changing shopping habits
Using a BNPL service has been shown to affect how people spend. 55% of users admit to spending
more than they usually would when they can use BNPL, and this is often on non-essential items.
Overspending could affect long-term budgeting.
If you need further information on how to effectively use BNPL services, or help with managing your finances more
broadly please reach out. Book a time to chat here.
