According to recent data from market research company Roy Morgan, awareness of ‘buy now, pay later’ services has increased rapidly in Australia.
75.5% of Australians aged 14+ are aware of the ever-growing list of buy now, pay later options available to them, which is more than double the level of awareness less than three years ago in September 2018 (36.9%).
And it doesn’t stop just at the awareness phase.
“Over 3.3 million Australians (15.7%) have used a buy-now-pay-later service in the year to June 2021, up from only 6.8% in September 2018”.
For the percentage of us who aren’t aware, what exactly are buy now, pay later services? Essentially, they let you buy, and receive, goods or services now and pay for it later, in instalments. Providers break down the cost of an item, for example a $100 pair of shoes, and you pay it off over a series of instalments – say 4 x $25 payments.
Sounds fairly straightforward. But there are risks. And as the number of providers increases, so do the opportunities for instant shopping gratification, without any real regulation or checks and balances to confirm that you can indeed pay the debt back.
So, what are some of the risks associated with using a ‘Buy Now, Pay Later’ service?
Lack of Regulation
As we briefly touched on, buy-now-pay-later providers do not have the same regulations that other loan and credit card providers do. Yet their services are readily accessible, particularly via mobile phone, and advertised prolifically, often with celebrity endorsement.
The lack of regulation means that it is easy for those who can’t afford the repayments to accumulate debt quickly, across multiple providers, for things they don’t really need.
Spending & Shopping Habits
Australians are buying all manner of things on ‘buy now, pay later’ – from essential items like groceries, right through to luxuries and now even your bar tab at the pub.
Without having to think about - work or save for - what you are buying the value of that item and our perception of what things truly cost can be skewed.
Fees & Charges
The often-impulsive nature of buy now, pay later purchases means that users don’t always think about whether they can afford to make the repayment instalments when they are due. Delaying repayments can attract late fees which are often the equivalent of mid-to-high interest rates and accruing debt in this way can negatively impact your credit rating or your ability to secure finance in the future.
The next time you are considering buying something you can’t yet afford, think about the consequences behind the marketing gloss of the ‘buy now, pay later’ products on offer and how they could negatively impact your chances of securing a home, personal or business loan in the future.
You can read more about the reasons we say ‘no way to afterpay’ in our blog here.
And if you’d like to look at more long-term saving and investment strategies give us a call at Hub Advisory Group – we’re your one stop financial service.
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