Buy now,pay later services such as the Afterpays and Zips of the world have had a bit of a moment over the past five or so years,not only in sharemarket terms (the former is now valued at),but also in popularity as shoppers flock to the seemingly attractive payment option.
Buy now,pay later services can seem like a good deal on the surface,but can be problematic if used improperly.Aresna Villanueva
If you’ve never used or heard of BNPL services,they pretty much do what they say on the tin. You can purchase a product and instead of paying the full price upfront,you split the cost into four or more instalments which you repay over time.
In essence,it’s a modern,teched-up version of the lay-by system which fuelled the purchase of many an overpriced couch back in the day – only,unlike layby,you get to take your purchase home straight away,rather than having to wait until it’s fully paid off.
Last year, said they’d used a BNPL service,according to Finder,slightly lower than in 2022 when only half of us had. Unsurprisingly,the biggest uptake is among younger generations,a group who are some of the by the current cost-of-living and rental crises.
What’s the problem?
As attractive as BNPL services seem,we all know if something seems too good to be true,it probably is. BNPL services charge users late fees if payments are missed,and an increasing number of customers (10 per cent as of last year) are being slugged. They may also encourage you to spend more than you can afford,and can make accurately tracking your spending more difficult.
Furthermore,because they’re not currently considered credit products under the law,users lack the protections,checks and balances that usually come with traditional products such as credit cards. However,the government plans to introduce legislation soon to regulate the sector,so watch this space.
What you can do about it
Meanwhile,if you’re a BNPL user or thinking about becoming one,here are some things to consider:
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.