03 Oct Buy now, troubles later?
Almost one in three people who use buy now, pay later services is finding themselves in financial trouble, new research has found.
The buy now, pay later market in Australia is booming, with a growing list of providers now available in Australia.
Dominating the market is Afterpay, with 3.3 million active customers in Australia and New Zealand, and Zip Co, with 2.1 million in Australia.
Latitude Pay has 425,000 customers in Australia and New Zealand.
According to a survey by Rate City, despite the growing popularity of these brands, it is having an impact on Australia’s long-term financial position.
Rate City research director Sally Tindall said that every day, thousands of Australians are signing up to these services, all wanting to purchase something now and delay the pain of actually paying for it.
“Our research found 28 per cent of buy now, pay later users are getting themselves into money troubles, with some unable to pay their bills as a result,” she said.
Not only are Australians spending money they don’t have, the survey result showed Australians are purchasing more.
“It’s concerning more than half of buy now, pay later users surveyed said these platforms caused them to impulse spend,” Ms Tindall said.
“Impulse shopping can put a sinkhole into the best laid savings plans.”
She pointed out that these platforms have a shorter leash than credit providers if they have just one platform, while also highlighting that missing a payment can have longer-term implications.
“If you’re applying for a home loan, be aware that heavy use of buy now, pay later services could be a red flag and potentially reduce the amount the bank will let you borrow,” she said.
Ms Tindall advised consumers to be patient with any purchases they are making.
“Hit pause before you pay, at least for 24 hours, and if you make a mistake, send your purchase back. There’s nothing worse than having a bad shopping decision hanging in your closet.”
Ms Tindall’s tips if using buy now, pay later:
- Read the terms and conditions.
- Set yourself strict spending limits.
- Don’t impulse buy.
- If you get into trouble, pull the pin.
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Article reproduced from Nest Egg by Cameron Micallef
