Buy Now Pay Later services have been heavily advertised in both the media and retail stores.

So how good are they and should you make use of them?

What are Buy Now, Pay Later services?

These are financial services that let you buy a product today, but delay payment to a later date. Over the past five years, their popularity has grown significantly and include Afterpay, zipPay, Oxipay and Openpay.

These services are offered at point of sale in many retail stores, as well being an option for online shoppers. You will need to provide your credit card or bank account details so that payments can be automatically deducted. You may be required to pay an initial deposit on the purchase.

Advantages of a Buy Now, Pay Later service?

The first advantage of these services is that you can take home your purchases and pay them off over time. Quickly set up an account, use it straight away, compared with time it takes to apply for other credit types.

As with credit cards and debit cards, Buy Now Pay Later services are fully integrated with a store’s checkout systems. So it is just as easy to use this service, just like your EFTPOS card. As long as you make your repayments on time, there are no fees or interest to pay. The payments are automatically deducted from your nominated account.

Disadvantages of a Buy Now, Pay Later service?

As mentioned above, the initial advantage of these services allows you to defer payments, but so do credit cards. Difference between Buy Now, Pay Later service and credit is that credit cards are regulated under the National Credit Act. Providers are required to comply with this Act.

Buy Now Pay Later services who are not covered by this Act, don’t need to enquire about your financial situation to ensure that you can afford the repayments. You might consider this an advantage, but in reality, borrowing more than you can afford to comfortably repay is a distinct disadvantage of Buy Now Pay Later services.

Also, since most credit cards charge interest on purchases, an interest free service, such as Afterpay, can be very seductive. Clearly an interest free option is a good financial move, but not if it encourages you to make impulse purchases that you can’t afford.

Don’t have enough money in your account to make a payment when it is due, you will incur a late fee, which for Afterpay is $10 with another $7 if you don’t make the payment within another seven days. If you have used the Buy Now Pay Later service to purchase items that you really can’t afford, these late payments can quickly add up and might even total more than the actual cost of the item!

If you already struggle to control your finances, then these Buy Now, Pay Later services are not the best option for you. For help organising your finances, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.

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