Buying online can have its advantages - 24/7 shopping, no need to brave the crowds, delivered right to your door… and for many sites, the ability to buy now, pay later.
Over the past few years, services like Afterpay and ZipPay have risen in popularity, particularly among younger people. These allow you to break down your purchases into smaller instalments over several weeks.
Afterpay has come under fire in the news recently, due to its increasing popularity - in fact, more than 1.9million transactions were made in the month of June 2018*.
While there are some of the advantages of using "buy now, pay later" services, there are also a few things to keep an eye out for to make sure you're not getting yourself into financial trouble.
Afterpay allows you to essentially layby purchases, by paying off your purchases in four equal instalments and is available online and in many physical stores.
ZipPay, on the other hand, is more of a line of credit with a minimum repayment each month, and no fees charged if the full amount is repaid by the specified due date. Both methods are quick to sign up for, and provide an alternative to using a credit card, and are interest free payment options.
When used appropriately, these services can help with cost smoothing, or allowing you to take advantage of cost savings if an item you've had your heart set on for a while comes up on sale a few days out from payday. Here are some of the benefits:
Australians currently owe over $903 million to buy now, pay later services, and approximately one in six users are in some kind of financial difficulty*. There are very real risks to using these facilities if not managed properly.
The idea of paying your purchases off in small instalments seems cost effective and budget friendly… but can actually encourage you to spend more. For example, the repayment instalment on one $200 purchase might only be $50… but make four or five of those purchases, and your repayments could end up being over $200 per fortnight.
If you make your scheduled repayments on time, happy days. No fees, no additional costs. But miss a payment, and you'll get hit.
Your history with services like Afterpay and ZipPay can have an impact on your credit history. Missed payments or accrued debts can be recorded on your credit file and reported to debt collectors, which could affect your ability to apply for a home loan or credit card down the track.
Using Afterpay effectively can have its benefits for budgeting, so here are some tips to make sure you stay on top of your spending.
The best option of course will always be to save for your purchases before making them, but if you do use services like Afterpay or ZipPay, make sure you're spending within your means and making repayments to avoid getting into further financial trouble.
Want some help with budgeting? Contact your nearest branch for one on one help in setting up your budget to reach your goals.
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