Buy now, but can you pay later?

Buy now, pay later (BNPL) services offer you the flexibility to purchase what you want when you want it. BNPL providers, as the name suggests, let you pay in easy instalments.

We can think of BNPL as today’s layby, as it essentially offers you the same ease as layby.

Some BNPL providers include:

  • Afterpay
  • Brighte
  • Bundll
  • Fupay
  • Humm
  • Klarna
  • LatitudePay
  • Openpay
  • PayPal
  • Payright
  • Zip Money
  • Zip Pay

Many major banks have also introduced BNPL products, which make the product you always wanted a bit more affordable.

While BNPL services have their advantages, they can also put you in a spot of bother if they are not managed carefully. It can be hard to juggle repayments and other financial commitments side by side.

Be cautious when using BNPL products

In 2021, ASIC reported that BNPL users were more likely than non-BNPL users to have experienced financial stress in the previous 12 months (21% versus 12%).1

ASIC further found that a considerable proportion of BNPL users were taking desperate measures to meet their repayments on time. One in five BNPL users had cut back on, or went without essentials such as meals, while one in six took out an additional loan to make their BNPL payments.1

Research by Financial Counselling Australia indicates that BNPL products are not a free or low-cost option compared to traditional credit cards. Their research indicates that the late payment fee and monthly account keeping fee can can add up to an amount that effectively equates to an extremely high quasi-interest charge. Financial counsellors are seeing increasing numbers of clients using BNPL for small amounts and then paying these fees for multiple transactions.2

Always use BNPL services with caution and remember to:

  • Keep an eye on the fees. Some BNPL services charge a subscription or monthly fee which could add up. These fees make the items costlier in the long run. There are other BNPL services which are interest and fee free, but if you don’t pay on time you could be charged a late fee.
  • Stick to a budget. While BNPL can offer you the freedom to buy what you want, you should always stick to a budget. People tend to use BNPL to get their hands on things which would otherwise be out of their reach.

It’s important to always stick to a monthly budget. Set money aside for essentials, utility bills, loan payments and other expenses before using BNPL.

  • Think about your credit rating. BNPL services may not access or check your credit history when you decide to sign up with them, but they may still report late or missed payments to credit reporting bodies like illion. So, a missed or late payment can be detrimental to both your credit report and your credit score.
  • Link BNPL to a bank account or debit card. Avoid falling into a debt trap by linking your BNPL payments to an actual bank account or a debit card, instead of a credit card. BNPL services may not charge you any fees, but your credit provider might still charge you interest for those payments. Always make sure you have money in your account to cover any BNPL payments.

More Australians are using BNPL to pay for goods and services

It’s safe to say that BNPL is a growing market and offers customers flexibility when it comes to paying for goods and services.

According to a survey conducted in 2021, around 26% of regular online shoppers in Australia used BNPL services to buy clothing and other accessories. Among the respondents, around 20% used BNPL services to pay for electronics and computing devices in that same year.3