The number of Australian consumers using buy now, pay later platforms has nearly doubled in a year, according to a review undertaken by the Australian Securities and Investments Commission (ASIC). But with one in five consumers struggling to make repayments, there is a growing concern about vulnerable consumers facing financial hardship as a result of taking on too much debt.
Understanding buy now, pay later
When you use a buy now, pay later service, you’re able to buy a product and delay the payment over several instalments instead of paying the full amount upfront. And while you don’t pay any interest on the purchase, you are charged fees that can quickly add up.
Before you sign up for buy now, pay later, keep in mind:
– It’s easier to overspend and buy more than you can afford when you’re not paying for something up front.
– The fees and other costs to use the service can quickly add up.
– It can be hard to keep track of repayments – particularly if you sign up for more than one service.
– Too much debt- especially buy now, pay later credit – can impact your ability to borrow for a mortgage, car finance or even a personal loan in the future.
To get the most out of buy now, pay later, we recommend you:
– Stick to a limit and only have one buy now, pay later account at a time.
– Budget for your debt repayments so that you don’t miss any repayments
– Consider linking your buy now, pay later account to your debit card instead of your credit card, so you only spend what you have and you avoid paying credit card interest.
If you do run into trouble with buy now, pay later, it’s vital you get financial advice immediately.