Buy Now, Pay Later

Don’t Get Caught Out!

Strapped for cash but need it now? Buy now pay later – where you buy a product and pay it off in instalments over time, instead of paying the full amount upfront – sounds like an easy way out but there are some traps to look out for.

YFS Financial Counsellor, Shannon warns that while buy now pay later might seem convenient it can be easy to overspend, hard to keep track of payments and you can end up paying a lot in fees. If you miss repayments this can also impact your credit score, which could make it hard to apply for other loans in the future, like a mortgage.

Watch Out For The Fees
While these services are often advertised as ‘interest free’ or ‘0% interest’, they charge fees that can quickly add up.

According to you could be charged:
• late fees if you miss a payment or pay late, around $5 to $15
• monthly account-keeping fees – a fixed monthly fee, up to $8 a month
• payment processing fees – an extra fee of around $3 each time you make a payment
• establishment fees to set up the account – sometimes up to $90.

You may also have to pay bank fees if you don’t have enough money in your account to cover the payment. So that ‘bargain’ can end up costing you a lot more than you thought.

In 2020, Australian Securities and Investments Commission (ASIC) research into the buy now pay later industry found that in order to meet repayments on time, one in five consumers:
• missed or were late paying other bills or loans
• cut back on or went without essentials such as meals.

Tips For Managing Buy Now Pay Later
The best tip is to look at other options rather than using buy now pay later. Can you buy the item second-hand or borrow from a friend until you’ve saved up to buy your own?

Shannon’s tips for managing buy now pay later services are:
• Think about other ways to pay such as layby or a no interest loan.
• Check the fees and charges, especially late payment fees.
• Stick to a limit to avoid overspending and only have one buy now pay later account at a time.
• Keep track of your payments and budget for them with your other loan payments and bills.

If you’re struggling to make repayments, you can talk to a financial counsellor for free, confidential advice. Call YFS on 3826 1500.