While BNPL is not a ‘trap’ as such, it can be a big problem for those who have trouble managing debt. The number of consumers in arrears with BNPL currently sits at 8.9% the highest in three years.įor this reason, economists are urging more regulation in the BNPL sector. When you’re already trying to manage debt, adding BNPL into the mix could cause the problem to spiral out of control. Unfortunately, the people who get into trouble with BNPL are often already highly indebted. While you may be able to meet your BNPL repayments, you may be left with an unmanageable credit card balance that can incur further fees and interest charges.įrequently Asked Questions (FAQ) Is Buy Now, Pay Later a debt trap?īNPL can be a useful payment tool when used responsibly. One in five consumers use a credit card to make BNPL instalments, essentially using one type of debt to pay another. Repaying Buy Now, Pay Later with credit cards With the instant gratification of taking goods home on the spot (or delivered to your doorstep), shoppers may be prone to spending more than they can afford.Īnd, with multiple BNPL providers available in New Zealand, it can be easy to get trapped by using more than one, making it difficult to keep track of your outgoings. Looking at the large sum of ‘available funds’ can make it easy to spend at will, causing people to make a bunch of impulse purchases that they may not have purchased otherwise, and may not be able to repay. Purchase limits encourage overspendingīNPL platforms provide shoppers with a purchase limit, ranging from $1,000 to $10,000 - which can sometimes be beyond their means. If your purchase is above $204 - a maximum late fee of $68 may be applied. One provider, for example, currently charges a $10 late payment fee and a further $7 every 7 days until the payment is made, per order. The problem is, BNPL makes it easy to bite off more than you can chew as they don’t check if you can actually afford to make the repayments, and many Kiwis’ fall victim to late payment fees. High late payment feesīNPL platforms make money from the fees businesses pay for their services and from late payment fees. Understanding the risks will help avoid the slippery slope to long-term debt. Like any debt, Buy Now, Pay Later comes with risk.
You pay $30 on the day and another $30 every fortnight for the next 3 weeks. For example, you purchase a pair of shoes for $120 at an Afterpay-affiliated store. It’s as simple as splitting the total cost of an item into several equal instalments. You pay the first instalment at the time of purchase and repay the rest each week or fortnight until you’ve cleared the balance.Ī retailer can partner with as many BNPL platforms as they like, providing multiple payment options to their customers.
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These include Afterpay, Laybuy, Klarna, Zip Pay, Humm and Genoapay.ĭepending on the platform, the total cost of the item is split into 4 to 10 payments.
We have several BNPL platforms in New Zealand which are widely available as a purchasing tool in-store and online. Watch the video What is Buy Now, Pay Later (BNPL)?īNPL is like the old school layby system but allows shoppers to take goods home before they’ve paid for them in full.
How do platforms like Afterpay collect debt?
How will Buy Now, Pay Later affect my credit rating?Ĭould Buy Now, Pay Later options like Afterpay or Laybuy help my credit score?Īre Buy Now, Pay Later options like Afterpay or Laybuy bad for my credit score?ĭoes Buy Now, Pay Later show up on my credit report?Ĭan you use Afterpay or other Buy Now, Pay Later options to pay your bills? What are the risks of Buy Now, Pay Later? Let’s take a closer look at BNPL and how you can avoid negatively impacting your financial wellbeing, and ultimately, your credit score. While Buy Now, Pay Later may seem like a good idea at the time, it only takes one missed payment to land your finances in hot water. As long as you can meet repayments on time, the system can be a helpful way to pay for big-ticket items.īut, like all debt, BNPL comes with risk and responsibility. More and more Kiwis are choosing to buy now and pay later.īNPL allows shoppers to spread the cost of goods over several weeks interest-free. If so, you may have been tempted by Buy Now, Pay Later (BNPL). Have you seen something you just have to buy recently? Learn more about the risks of Afterpay, Laybuy, and other Buy Now, Pay Later options
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