Best ways to pay for something you can't afford

Best ways to pay for something you can't afford

Say you don’t have the cash on hand for something you want to buy – does that mean you can’t afford it? Let’s look at some of your options.

Things like a debit card linked to your account, contactless payment or online payment are all ways of paying money that you already have. What we’re talking about here is when you don’t already have the money to finance a purchase. These include:

  • Credit cards
  • Gift cards and vouchers
  • Lay-by
  • Afterpay and zipPay
  • PayPal

Credit cards

Credit cards allow you to buy something on the spot, whether or not you have the cash to pay for it. To obtain a credit card you must fill out an application with your bank or financial institution.

Credit cards certainly make purchasing easier. However, you need to remember that you are still spending money when you use your card, and will have to pay the bill when it arrives. If you don’t pay the full amount by the due date, then you will be charged interest – meaning it’s easy to end up owing more than you intended.

Gift cards and vouchers

Gift cards, vouchers and store cards all basically serve the same function. You use them like a pre-paid credit card. Money is pre-loaded on the card and it can be used until all the money is spent. The difference between these sorts of cards and pre-paid credit cards is that they can only be spent at the store they were issued at.

Lay-by

A lay-by agreement is one that allows you to you buy something and pay for it in several instalments before taking it home. You won’t be allowed to take it home until it is completely paid for. You’ll usually pay 10-20 per cent as a deposit (and any deposit you pay is an instalment). You must get a copy of your written lay-by agreement that states all terms and conditions, including any termination fees that may apply.

Lay-by can be a useful way of spreading payment of purchases over a longer period, to help your budget cope. However, there are drawbacks to consider, like:

  • Large department stores often charge service fees (although many smaller retailers might not)
  • Large department stores may also keep your deposit (up to 20 per cent) and the service charge if you cancel your lay-by
  • Your lay-by is always locked in at the original price for the product, so if it later goes on sale, you miss out on the lower price
  • If the store goes into receivership before you’ve finalised the lay-by, you will probably have lost the item and you may become an unsecured creditor, meaning you become the last in line to get your money back

Remember these tips to helps protect your rights:

  • Before you sign the agreement and pay any deposit, make sure you read and agree with the terms and conditions, including payment dates, amounts and any extra charges you’ll have to pay if you decide to cancel
  • Keep copies of the agreement and receipts for the deposit and all instalments, so you’re covered if there is a problem later

Afterpay and zipPay

Afterpay is a system similar to lay-by. It offers online shoppers a simple instalment plan, allowing them to pay for purchases in four equal instalments, which are due every fortnight. When you shop from a store in Afterpay’s online Shop Directory, you then choose Afterpay as your payment method at checkout (like PayPal). First-time customers must provide payment details to set up an account.

After you check out, the goods will be shipped to you by the seller. You can log in to your Afterpay account to see your payment schedule, and/or make a payment before the due date. Otherwise, the instalments will automatically be deducted from your debit or credit card every fortnight.

There is no fee to you when you’re purchasing. The only fees applied are late fees if your scheduled payments are unsuccessfully processed and you fail to make your payment via a different method. 

zipPay is basically identical, except that you can pay weekly, fortnightly or monthly, giving you more flexibility than the fortnightly system used by Afterpay.

PayPal

PayPal pays the seller on your behalf when you purchase, and then retrieves the money from you. You will be required to link a credit card or bank account to PayPal when you create you first create your account.

If you have enough money in your PayPal or linked bank account to cover a purchase, then it will simply be deducted. If you don’t, PayPal will make two attempts to complete the transaction from your bank account before switching to your backup funding source.

Your bank may charge you fees for each failed attempt, so you should immediately add sufficient funds to your bank account so that the payment is successful on the first attempt.

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Learn more about bank accounts

Can I link a bank account to Paypal?

Paypal is a safe and convenient way to pay online without the need to share your financial details. You can send and receive money or accept credit and debit cards as a seller using Paypal.

It’s easy to link your bank account to a Paypal account and start making transactions within minutes.

To start, you first need a Paypal account (it’s free to join). When setting up your Paypal account, you will be prompted to link a credit card or bank account (or both if you wish).

PayPal works without a balance; you can use Paypal to shop or send money when your balance is zero.

When your Paypal balance is zero, Paypal will ask you to choose your preferred payment method at the checkout.

This could be either your linked bank account or credit card. Your bank details can be updated if you change banks or credit cards.

How do I transfer money from Paypal to my bank account?

Transferring cash from Paypal into your bank account is simple…if you have a Paypal account that is.

Once you’re logged into your Paypal account, the account balance will appear on your home page. Below your balance are two options:

  • Add money
  • Withdraw money

Choose option two if you want to transfer money from your Paypal account to your personal bank account.

The next screen will prompt you to either enter new bank account details or choose a bank account that’s connected to Paypal. You can always add more bank accounts to your Paypal profile.

Another way to transfer out of Paypal is by jumping to the wallet tab on the top menu, and clicking ‘transfer money’. Both options will give you the same result.

Can I have a PayPal account without a bank account?

You don’t need a bank account to send or receive money through PayPal. However, you do need a bank account if you want to withdraw money from your PayPal account.

Can you open another account at the same bank?

Yes, you can open another account at the same bank if you already have an account there, but some banks place a limit on how many specific accounts you can open.

Generally, though, it is possible to have more than one everyday account, one personal account and one joint account, or have different types of accounts – such as a transaction account and a savings account.

Keep in mind that some bank accounts come with fees, so you could be charged twice for having two types of the same account at the same bank.

Also, if you have more than one high-interest transaction account at the same bank, only one account will be able to earn the highest rate of interest.

Can foreigners open bank accounts in Australia?

Many Australian lenders allow foreigners to open bank accounts in Australia. Often, this can be done before you arrive in the country – with no Australian address required. When you get to Australia, you can pick up your debit card, using your passport as identification.

Do I need to open a business bank account?

Just because you’re in business doesn’t necessarily mean you need a business bank account. You could be a sole trader not registered for GST, and use your personal bank account for business.

If you do want a business account, there are plenty of benefits attached to business transaction and savings accounts, as well as business term deposits.

There are business bank accounts designed for businesses with a high volume of transactions, and those for start-ups with a small amount of trade. You could also include an EFTPOS service with your account.

Some business bank accounts charge for the number of transactions per month, while others offer a pay-as-you-go fee structure, where you only pay fees for transactions you make.

It’s up to you whether your priority is mainly transactions, or earning the maximum amount of interest on your principal. There’s a business banking solution for you if you need one.

Can a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Can you deposit money into somebody else's bank account?

One of the easiest banking tasks in the world is depositing money. You can even deposit money into someone else’s bank account if you wish.

The basic information you need to deposit money into a third-party bank account is:

  • Payee’s name
  • Bank, building society or credit union (though this isn’t necessary)
  • BSB (or bank code, which is the branch identifier)
  • Account number

Including the name of the financial institution isn’t necessary – particularly with online banking – because the BSB will identify this for you.

A handy tip is to record yourself (or add a personal message) in the transaction description or reference. This will show up on the recipients account, letting them know who’s paid them the money.

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

How do I close a bank account?

Closing a bank account is one of those tasks that’s easy to put in the too-hard basket. There are quite a few steps involved, some which may require you to hang on the phone for a while.  

Here’s a handy checklist of items to tick off, so the job gets done quicker. If you don’t do your banking online, the following steps can also be done at a branch.   

  • Cancel any scheduled or recurring payments
  • Update your direct debit details (such as loan repayments) with creditors
  • Export your payee address book (to keep a record of saved third-party bank account details)
  • Transfer the balance of your account (to the new bank account)
  • Close your account online, or by calling the bank or visiting a branch

Can you find your bank account number online?

If your bank offers online services, you should be able to find your bank account number online by logging into your account on your bank’s website and checking your details there.

Keep in mind that each type of account you have with a bank comes with a unique account number. This means if you have a bank account as well as a savings account, for example, your bank account number and your savings account number will be different.

If you don’t have access to your bank account online or can’t login, you should be able to find your account number on a mailed bank statement, if you have one.

Alternatively, you can call your bank’s customer service number or visit a branch to retrieve your account number.

How do I open a bank account for a baby?

If you’ve just welcome a new baby into the world, congratulations. Opening a bank account for your child can be a wonderful first gift.

Before you can open your child an account, you’ll need to have a birth certificate or passport for your baby.

As the parent or guardian, you’ll also be listed as a joint holder on the account. This means you’ll need to have proof of your identification and address (a driver’s licence, passport, birth certificate or Medicare Card).

Many banks and credit unions offer baby banks accounts. Usually, you can apply online; otherwise you can head into a local branch or office with your documents.