Facts about buy now pay later schemes

Facts about Buy Now Pay Later Schemes

When you use a buy now pay later service, you can buy a product and delay payment. You usually pay off your purchase over a few weeks. For bigger purchases, it may be longer.
You don't pay interest on the purchase. Instead, you're charged fees and they can add up quickly.

Lots of shops offer different buy now pay later options. Buy now pay later providers include:

• Afterpay
• Zip Pay
• BrightePay
• PayRight
• Openpay
• Humm (previously known as Certegy Ezi-Pay and Oxipay)
• Make It Mine
  

Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.

What to look out for

While buy now pay later can be convenient, it can be difficult to juggle repayments with other financial commitments.

In 2020, ASIC research into the buy now pay later industry found that in order to meet repayments on time, one in five consumers:

• Missed or were late paying other bills or loans
• Cut back on or went without essentials such as meals

Before you sign up, keep in mind:

• It’s easier to over spend – you can over-commit to spending you can’t afford
• Costs can add up – you are charged fees and costs to use the service
• It can be hard to manage – if you sign up for more than one service, it can be hard to keep track of payments
• It might affect a loan application – lenders consider buy now pay later spending when you apply for a car loan or mortgage
• Late repayments can appear on your credit report – this affects your ability to borrow money in the future
• Lay-by can be cheaper – lay-by has no account keeping or late fees

Compare the fees and charges

Buy now pay later services are often advertised as 'interest free' or '0% interest'. But they charge fees that can add up quickly. They may charge:

• Late fees — if you miss a payment or pay late, up to $15
• Monthly account-keeping fees — a fixed monthly fee, up to $8 a month
• Payment processing fees — an extra fee of around $2.95 each time you make a payment, on top of your set repayment
• Establishment fees — a fee to set up the account. For some there are no establishment fees, but for others these fees can be up to $90.

You may also have to pay bank fees:

• Overdrawn fees — if you don't have enough money in your account to cover the repayment
• Interest — if you are paying by credit card

Important tips for managing buy now pay later

To make the most of buy now pay later services:

• Stick to a limit and aim to have only one buy now pay later account at a time
• Make sure you can afford the ongoing payments
• Budget for bills, loan payments and buy now pay later payments
• Consider linking your buy now pay later account to your debit card instead of your credit card. That way you're using your own money and avoid credit card interest

What to do if you get into trouble

Most buy now pay later providers have dedicated complaints and hardship services. Contact your provider if you have a complaint or if you're having trouble making repayments
If you're struggling to make repayments, you can also talk to a financial counsellor. They offer a free and confidential service to help you get your finances back on track

How can a Financial Counsellor help?

• Financial Counsellors help people who are experiencing financial difficulty. They are skilled professionals who will guide you through your options and help you plan your way out of debt
• Doing a full assessment of your financial situation, including regular income and expenditure, assets and liabilities, to help you fully understand your position, create a budget and put a plan into place
• Providing advice on how to negotiate with your creditors, government agencies or other providers.
• Negotiating directly with your creditors in certain circumstances
• Providing advice about what options, rights and responsibilities you may have
  Referring you to other services you may need, such as legal services, crisis food and accommodation services, and health services

What can a Financial Counsellor provide information about?

• Credit and debt-related matters
• The rights of debtors
• How to lodge complaints with various ombudsman schemes if you feel you are not being treated fairly and whether you should have been given a loan in the first place
• Working out a realistic payment plan for debts
• How to access other specialist support services, including gambling, family support, personal counselling, legal aid and emergency relief

It’s then up to you to make the decisions about how to manage your situation with the advice you’ve been given.