BNPL for EOFY? Don’t accumulate debt you can’t afford


It can be tempting to get carried away with year-end sales, and even if you don’t have the money to make a compelling deal, there’s always the option to buy now, pay later. Right?

But financial advisers warn you that you should think twice before using BNPL’s services, especially if your income fluctuates and you are not sure how much you will have in your account from week to week. ‘other.

Almost one in five Australians and more than a quarter of 18-49 year olds have BNPL debt, according to a report by NAB Economics released in June.

The report surveyed a representative sample of over 2,000 Australian consumers and found that nearly four in ten people with BNPL debt have missed a payment.

Australia’s largest BNPL service, Afterpay, allows buyers to pay for their purchase in four bi-monthly installments processed automatically using consumers’ credit or debit card details.

If you do not have enough funds to make the payment by the due date, you will be charged a late fee of $ 10, and an additional $ 7 if the payment is still not paid after one week.

Australia Financial Advisory Chief Executive Officer Fiona Guthrie said advisers are reporting more and more clients have struggled to pay BNPL’s debts since the start of the pandemic.

Even before COVID, around 40% of financial advisers surveyed said at least half of their clients had BNPL debt, she said.

Ms Guthrie explained that problems arise when people have multiple BNPL debts and their repayments exceed their income, which leads to many not paying rent and buying food so they can pay their BNPL bills.

“You get into debt, spend money you don’t have, and the risk is that you become over-committed,” Ms. Guthrie said.

“It’s very easy to get tricked.

A financial advisory client with two children had 20 BNPL payments owed and couldn’t pay rent and other bills or even buy food after paying down payments.

Advisors say BNPL users do without the essentials to be able to keep their BNPL accounts open.

“People don’t see it as debt and I think that’s one of the things we need to change the narrative about,” Ms. Guthrie said.

“Buy now, pay later, platforms are promoting themselves as a budgeting tool, but in fact, it makes budgeting more difficult. “

The value of BNPL transactions in Australia and New Zealand tripled between 2017-18 and the previous fiscal year, with around $ 10 billion processed in 2019-20, according to the RBA.

Men aged 18 to 29 are the group most stressed by BNPL’s debt, with six in 10 having missed a payment, according to the NAB study.

Tips from RateCity for using BNPL

  • “Read the terms and conditions
  • “Set yourself strict spending limits
  • “Don’t buy impulse
  • “If you have problems, pull the pin”.
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