Buy now pay later schemes could be costing you more than you think!
It might be making it easier than ever for Aussies to shop, but you could be paying more than what you bargained for if you can’t pay on time.
The simplicity of buy now and pay later credit schemes are an easy way for Aussies to get hold of items they need without having the cash up front, but buyers should be aware of the high interest charges they can be hit with if the outstanding balances are not paid on time.
While it’s clearly attractive to get hold of extra items without having to pay the whole cost up front, it’s important to read the small print and educate yourself about what you’re signing up for.
TODAY chatted to consumer campaigner Christopher Zinn for his tips when using these schemes.
TODAY: When it comes to using a buy now, pay later scheme — are they becoming too easily accessible?
ZINN: There are concerns for people who overcommit and can’t meet their payments in time — in which case there are late payment fees. Afterpay has more than a million users, and if they are late they face a $10 charge at first and then $7 a week for the outstanding amount. But it makes it easier to buy things you may not be able to afford at that time. If it’s managing a cash flow issue that’s one thing, but if it is trying to delay paying for a longer period it’s not a good option due to late payment fees.
TODAY: Despite there being no interest involved, many of these services still charge hidden fees. What are some of the big ones we need to watch out for?
ZINN: The fees and charges are not hidden, but might be overlooked and ignored by some people desperate to buy a product or service. These services get 80% of their income from commissions merchants pay and some 20% from the late fees — so obviously some people who can’t meet their obligations in time end up subsidizing those who do. Afterpay users are charged a late payment fee of $10 and a further late fee of $7 if the payment is not made within seven days. Some of the businesses — such as Openpay or Zipay — can have service fees and establishment fees for opening accounts with higher credit limits.
TODAY: So how can we be more mindful when using these schemes?
ZINN: Don’t buy what you can’t afford, it will catch up with you. Use these tools as a cash flow management tool not as a credit facility. Plus:
- Read the fine print
- Stick to a budget
- Use a debit card
- Set payment reminders
Interview and additional text by Lauren Hollands