We live in a fast-paced world. A world where we can have what we want, when we want it… and we want it now!
But what is the real cost of fast money? Sure, it may seem convenient, but what is the actual cost in the long run?
Let’s talk 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 and you can now even buy now pay later salary. Some well-known buy now, pay later options include Afterpay, Zip Pay, Latitude Pay and FuPay. Some 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, leaving you in a position where you fall behind or go without essential items.
If you cannot afford the item, can you afford the repayments?
Before you sign up, keep in mind:
- It’s easier to overspend – 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.
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. You can contact your provider if you have a complaint or if you’re having trouble making repayments.
Financial Counsellors at La Trobe
You can also talk to a financial counsellor here at Uni, if you’re struggling to make repayments, not getting a satisfactory response from a provider or want more general help with budgeting or have other financial concerns
And remember when you are holding that incredible pair of shoes that you just HAVE.TO.HAVE….. ask yourself, ‘Do I need these, or do I just want them?’.
The choice is yours.