ME: The dangers of “buy now, pay later”

Friday 01 Dec 2017

A raft of “buy now, pay later” options like Afterpay and zipPay are giving the consumers the opportunity take purchases home immediately and pay them off over time. It may sound convenient but there are downsides that shoppers need to be aware of.

Late fees can be costly

There’s no cost to sign up, and no interest charges, but neither Afterpay nor zipPay are entirely fee-free.

Afterpay requires payments of four fortnightly instalments, while zipPay lets customers set up weekly, fortnightly or monthly repayments.

With zipPay, if you don’t pay off your statement balance in full by the end of the month, a $5 monthly fee is added to your account.

If you’re late with an Afterpay repayment, a $10 fee applies plus a further $7 charge if your payment is still outstanding seven days later. So, missing all the repayments on, say, a $100 pair of shoes could cost you $68 in fees.

Shoppers aren’t protected by the National Credit Code

This festive season, it makes sense to think about how you pay for purchases.

Your credit or debit card come with scheme guarantees that protect you if the card is lost or stolen. Your credit card also comes with an individually determined credit limit to ensure you don’t get into financial hot water. That’s very different from the likes of Afterpay and zipPay, which aren’t covered by the National Credit Code, so there is no requirement to check whether or not consumers can afford their purchases.

By paying off your credit card in full each month, it’s possible to avoid interest charges altogether, and if the tab is building, consider switching to a low rate card or take advantage of a balance transfer offer. After all, it may be called the silly season, but it’s still important to shop smart.

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