Booming, buy now, pay later causing money problems for 1 in 3 users

Nearly a third of people who use Buy Now and Pay Later (BNPL) services find themselves in financial difficulty, according to a RateCity study.

RateCity surveyed 1,009 Australians to find out the impact of these services on their personal finances, particularly in light of COVID-19 and ahead of the next ASIC review, scheduled for later this year.

Results of the RateCity BNPL survey:

Who Uses BNPL?

  • 1 in 3 people have used BNPL (32%).
  • More women used BNPL than men (37% of women versus 27% of men).
  • Half of 18 to 34 year olds have used Afterpay, Zip Pay or similar.

BNPL can cause money problems:

Almost a third of people (28%) who used BNPL found themselves in the throes of money problems. This includes:

  • 16% of people went over budget, leaving them struggling to pay for other expenses.
  • 14% paid late fees.
  • 9% (almost 1 in 10) have overdrafted their bank account due to BNPL payments.

BNPL getting people to buy on impulse:

  • More than half of those surveyed (53%) said they were more likely to make impulse purchases using BNPL.
  • Almost 7 in 10 young Australians said it makes them more likely to make impulse purchases (68% of 18-34 year olds).
  • Women are more likely to make impulse purchases using BNPL than men (women 57%, men 47%).

BNPL booming in Australia

The buy now, pay later market in Australia is booming, with a growing list of suppliers now available in Australia. Afterpay, with 3.3 million active customers in Australia and New Zealand, dominates the market and Zip Co with 2.1 million in Australia. Latitude Pay has 425,000 customers in Australia and New Zealand.

RateCity Research Director Sally Tindall said: “Every day thousands of Australians sign up for these services, all wanting to buy something now, but delay paying for it.

“Our study found that 28% of users who buy now, pay later find themselves in money problems, with some unable to pay their bills,” she said.

“This is for over half of purchases now, users who were polled later said these platforms made them spend money.”

A Zip Co spokesperson pointed out that the company’s own numbers do not match RateCity’s findings.

“RateCity’s research does not reflect the experience of Zip where, despite COVID, only 0.002% of Zip customers are struggling (840 vs. 2.1 million),” he said.

“What’s more, a recent Senate Interim Report found (recommendation 8.63) even at the height of consumer financial hardship claims for COVID in March and April 2020, in the BNPL sector, was less than 1%.

“More generally, Zip has always performed credit checks on all customers (each month, about 1 in 100 Zip customers are late each month, compared to 1 in 6 for credit cards). If a Zip customer misses a minimum payment, their account is locked, so they can’t spiral into debt like a credit card. “

Ms Tindall said impulse buying can put a drain on the best savings plans.

“Press pause before you pay, at least for 24 hours, and if you make a mistake, send your purchase back. There is nothing worse than having a bad buying decision in your closet.

“Although buying now, paying later has become a school of hardship for some Australians, services like Afterpay put customers on a much shorter leash than a standard credit card, if they do. stick to a single platform.

“People who make a number of current purchases across multiple platforms risk losing track of their refunds. This can easily result in multiple late fines and in some cases overdraft fees from your bank.

“If you are 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 allow you to borrow,” he said. she declared.

Tips if you use Buy now, pay later

  • Read the terms and conditions.
  • Set strict spending limits.
  • Don’t buy on impulse.
  • If you are in trouble, pull the pin.

Main BNPL services available in Australia

BNPL Supplier What can you buy and where can you use it?

Payment schedule

Maximum value of purchases Account Fee Late fee

Perform credit checks?

Afterpay Use at affiliate retailers.

Mainly non-essential items.

4 payments over 6 weeks $ 2,000 No interest or monthly fees. $ 10 per late refund and an additional $ 7 if you don’t pay in 7 days. Maximum charge of 25% or $ 68, whichever is lower. No
Bundll Wherever Mastercard is accepted.

Can be used for essential and non-essential items

Refund within 2 weeks.

Extend between 2 and 12 weeks for a fee.

$ 1,000

No charge for the basic package.

A 2 week extension costs $ 5. A 12 week plan costs 5% of the amount.

$ 10 late fee, then the account is suspended No credit check for the standard bundll.

Credit check for “Superbundll”.

To differ Used only to pay bills (mainly utility bills) 4 bi-monthly payments Limit of $ 2,000 per invoice $ 5.99 / month when you have bills due.

Card payments include a fee of 1.5% + 20c.

Nothing. Yes
humm (little things) Used by affiliate retailers as well as the majority of BPay billers.

Mainly non-essential items.

5 or 10 bi-monthly payments $ 2,000 No charge if you make 5 bi-monthly payments.

Monthly fee of $ 8 if you make 10 bi-monthly repayments.

$ 6 for each late payment May check your credit score, but it will not affect your score or leave a trace on your file.
Klarna For use in most stores via the Klarna app (excluding supermarkets). Pay in 4 bi-monthly installments.

May extend by 2 weeks for a fee.

$ 1,000 Up to $ 7 fee to extend for 2 weeks (depending on purchase price). $ 3 – $ 15, depending on purchase price, per late payment. The maximum charge is $ 45. Yes – visible on your credit report, but will not affect your credit score
LatitudePay Use at affiliate retailers.

Mainly non-essential items.

10 weekly refunds. $ 1,000 Nothing $ 10 per late payment, capped at $ 10 for a purchase under $ 50; and $ 50 for purchases over $ 50. Yes
Laybuy Use at affiliate retailers.

Mainly non-essential items.

6 weekly repayments Not indicated Nothing $ 10 per late payment and $ 10 more if you don’t pay in 7 days. $ 100 maximum Yes
OpenPay Use at affiliate retailers.

Mainly non-essential items.

Payment plans between 1 and 24 months. Not indicated Varies by payment plan and merchant. Up to $ 9.50 per late refund and up to $ 19.50 if you don’t pay within 7 days Can do a credit check.
PayItLater Use at affiliate retailers.

Mainly non-essential items.

4 weekly repayments $ 1,000 Nothing $ 10 per late refund and an additional $ 5 if you don’t pay after a week. Yes, but using its own testing and document verification services.
Separate it Use at affiliate retailers.

Some retailers require a credit card

Not indicated Works over existing credit card limit. Nothing Nothing No
Zip Pay All over Flexible repayment schedule provided you pay a minimum of $ 40 / month $ 1,500 $ 6 / month if you have money owed. Late fees of $ 5 apply after 21 days of non-payment of the minimum Yes

-Alison Cheung contributed to this story.

About Mitchel McMillan

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