Payment platform pitfalls

Chartered Accountants Australia New Zealand (CA ANZ) is urging Australians to stop and think about the financial ramifications of “buy now, pay later” services and the effect it could have on your financial position.


Susan Franks, Senior Tax Advocate said that consumers should consider a number of things before utilising the increasingly popular services:


1. They impact on your credit rating

“If buying a house or new car is on your list of purchases this year, then you might want to reconsider buy now, pay later services,” Franks said.


“The issue is that these services are classified as a line of credit, meaning the way you use them can impact on your future borrowing capacity.


“Lenders will take your Afterpay purchases into consideration alongside your other expenses, when deciding if they should give you a loan or not.


“If you’re looking to secure a mortgage or any loan in the next few months, I would recommend keeping your Afterpay, Zip or Laybuy purchases at bay. Plus, the less you spend now, the bigger the deposit you will have.”


2. Watch the late fees and budget for your repayments

“If you do use these services over the festive season, ensure you are aware of the late fees and make sure you have adequate funds aside to cover future repayments.


“With Afterpay, customers who miss all instalments are subject to a total late fee of $68 per transaction.


“With ZIP Pay, a late fee of $5 applies if no repayments have been made for more than 21 days and with Laybuy, customers who fail to pay within 24 hours of the due date are charged $10.00.


“If you are using Afterpay, ZIP Pay or Laybuy, for multiple purchases, it is imperative you account for future repayments in your budget, so you don’t get stung with multiple late fees.”


3. Don’t Overspend

“According to ASIC’s 2018 Review of Buy Now Pay Later Arrangements, 55 per cent of users believed that they were spending more on some items than before they started using such schemes.


“It is clear that their instantaneous nature can encourage bad spending patterns, leading consumers to overspend and deal with the financial pain later.


4. If you can’t afford it don’t buy it

“This one is an oldie but a goody – and perhaps the least surprising advice that an accountant could give – if you can’t afford it don’t buy it.


“Most of these “buy now, pay later” schemes, are loosely regulated, meaning the provider doesn’t have to check you can afford to make repayments before they sign off on your loan.


“This issue is backed up with statistics, with some reports that one in six Australians are left in financial hardship after using buy now pay later services.

“It’s easy for consumers to think they can afford things when they actually can’t, and just because a lender will give you the money does not mean you should take it.”


4 February 2020.