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Taking home what you want to buy now and paying for it later (within the specified timeframe, of course!), with no setup or interest charges – sounds appealing?

This type of service is called the ‘buy now, pay later’ scheme. Soaring in popularity amongst millennials and big retail giants, the leading players in the digital retail finance and payments industry include zipPay, zipMoney, Onepay and Afterpay etc. These companies are creating a shopping evolution, giving Aussies the opportunity to take their purchases home immediately and pay them off over time.

But would the convenience of these newly established digital services affect our purchase decisions and financial choices as an everyday consumer?

Here we explain how these payment services work, what fees you’ll pay and how to avoid getting into debt if you’re using these services.

 

What are ‘Buy now, pay later’ services?

This type of service is offered by approved retailers and allows you to order or purchase a product immediately and delay payment. with payment instalment options ranging over several weeks or, with some service providers, over a longer period of time.

This is simply another form of payment option at checkout.

 

What ‘buy now, pay later’ services offer

Digitised Wallet – Within minutes of registering for an account, some of these digital platforms will provide you access to a new digital wallet with funds to shop at your favourite stores (online or in-store) and pay for them later.

Completely Cardless – This means that these ‘buy now, pay later’ schemes allow you to make purchases without needing the full amount of cash upfront or a credit card.

No Interest – Majority of these platforms charge no upfront payments or interest and are committed to providing a transparent shop and transact payment system.

Automatic Repayments – Nominate your existing credit card or debit card to make your repayments. Automatic deductions from your account will be scheduled according to the service provider’s instalment plan options, so you won’t accidentally miss a payment.

 

What to look out for

Other fees – Although the majority of these service providers support transparency with no hidden costs, there are, however, Account Fees, Bank Dishonour Fees, Late Payment Fees or Outstanding Balance Fees you will need to be aware of before signing up.

Unless you are on top of your repayments, no fees will incur if you pay off your closing balance on time.

More credit than you can handle – You can easily overcommit by making a large number of purchases without having to part with your cash upfront.

Your ability to make repayments – There’s often no credit check when you sign up. Many of these companies are not obliged to check whether users like yourself can actually afford to make repayments based on your current financial situation.

Your credit score could be affected – As mentioned above, buy now, pay later services don’t check your ability to make repayments, so if you are already in debt, further debt could have an impact on your credit score which could make borrowing credit more difficult in the future.

 

Savvy Tips

# Save before you buy

Don’t rely on credit for everything. Save money for the items you want to purchase and work towards it instead of borrowing.

 

# Allocate budget

If you have a particular item you want to purchase, allocate the budget you will need for it and restrain yourself from shopping for more. You could easily lose track of how much you have spent using the pre-allocated credit funds in your digital wallet from these service providers.

 

# Purchase limits do apply

Depending on the service provider, the purchase limit will typically vary according to things like how long you’ve been using the service and your payment track record to date. So, make sure you stay on top of your repayments to ensure you have a healthy account history.

 

# Check if you have sufficient funds to make repayments

This is very important, check that you have enough funds for the next repayment date, if not closely monitored, you might result in paying the penalty fees mentioned above.

 

# Read the T&Cs

As we always say, read the terms and conditions so you know what you are entitled to and make sure you’re not caught out on the fine print.