Booming buy now, pay later causing money troubles for 1 in 3 users

Alex Ritchie-08/09/2020- 6 min read

Almost a third of people who use buy now, pay later services (BNPL) are finding themselves in financial trouble, according to RateCity research.

RateCity has surveyed 1009 Australians to find out what impact these services are having on their personal finances, particularly in light of COVID-19 and ahead of the next ASIC review, due out later this year.

RateCity BNPL survey findings:

Who’s using BNPL?

1 in 3 people have used BNPL (32%).
More women have used BNPL than men (37% of women compared to 27% of men).
Half of 18 to 34-year-olds have used Afterpay, Zip Pay or similar.

BNPL can lead to money troubles:

Almost a third of people (28%) who have used BNPL found themselves in money troubles as a result. This includes:

16% of people overstretched the budget leaving them struggling to pay for other expenses.
14% have paid a late fee.
9% (almost 1 in 10) went into overdraft on their bank account because of BNPL payments.

BNPL causing people to impulse buy:

More than half of those surveyed (53%) said they are more likely to impulse buy using BNPL.
Almost 7 out of 10 young Australians said it makes them more likely to impulse buy (68% of 18 to 34-year-olds).
Women are more likely to impulse buy using BNPL than men (women 57%, men 47%).

BNPL booming in Australia

The buy now, pay later market in Australia is booming, with a growing list of providers now available in Australia. Dominating the market is Afterpay, with 3.3 million active customers in Australia and NZ and Zip Co with 2.1 million in Australia. Latitude Pay has 425,000 customers in Australia and NZ.

RateCity research director, Sally Tindall, said: “Every day, thousands of Australians are signing up to these services, all wanting to purchase something now, but delay the pain of actually paying for it.

“Our research found 28 per cent of buy now, pay later users are getting themselves into money troubles, with some unable to pay their bills as a result,” she said.

“It’s concerning more than half of buy now, pay later users surveyed said these platforms caused them to impulse spend."

A spokesperson from Zip Co pointed out that the company’s own numbers do not align with RateCity’s findings.

“RateCity’s research does not reflect Zip’s experience where, despite COVID, only 0.002% of Zip’s customers are in hardship (840 from 2.1 million),” he said.

“Whats more, a recent Senate interim report found (recommendation 8.63) even at the peak of COVID consumer financial hardship requests in March and April 2020, across the BNPL industry was less than 1 per cent.

“More broadly, Zip has always done credit checks on all customers (each month about 1 out of 100 Zip customers is late each month compared with 1 in 6 for credit cards). If a Zip customer misses a minimum payment their account is locked, so they cannot get into a debt spiral, unlike a credit card.”

Ms Tindall said impulse shopping can put a sinkhole into the best laid savings plans.

“Hit pause before you pay, at least for 24 hours, and if you make a mistake, send your purchase back. There’s nothing worse than having a bad shopping decision hanging in your closet.

“While buy now, pay later has become the school of hard knocks for some Australians, services such as Afterpay put customers on a much shorter leash than a standard credit card, if they stick to just one platform.

“People that have a number of purchases on the go across several platforms risk losing track of their repayments. It can easily translate into multiple late fines and, in some cases, overdrawn fees from your bank.

“If you’re applying for a home loan be aware, heavy use of buy now, pay later services could be a red flag and potentially reduce the amount the bank will let you borrow,” she said.

Tips if using buy now, pay later

Read the terms and conditions.
Set yourself strict spending limits.
Don’t impulse buy.
If you get into trouble, pull the pin.

Key BNPL services available in Australia

BNPL provider	What can you buy and where can you use it?	Payment schedule	Max value of purchases	Account fees	Late fees	Perform credit checks?
Afterpay	Use at affiliated retailers. Primarily non-essential items.	4 instalments over 6 wks	$2,000	No interest or monthly fees.	$10 per late repayment and an additional $7 if you don’t pay in 7 days. Max fee 25% or $68 whichever is lower.	No
Bundll	Anywhere Mastercard is accepted. Can be used for essential and non-essential items	Repay within 2 weeks. Extend between 2 – 12 wks for a fee.	$1,000	No fees for basic bundle. A 2-week extension costs $5. A 12 wk plan costs 5% of amount.	$10 late payment fee then account is suspended	No credit check for standard bundll. Credit check for ‘Superbundll’.
Deferit	Used only to pay bills (primarily utility bills)	4 fortnightly instalments	$2,000 limit per bill	$5.99 /mth when you have bills owing. Card payments include 1.5% + 20c fee.	None.	Yes
humm (Little Things)	Use at affiliated retailers as well a majority of BPay billers. Primarily non-essential items.	5 or 10 fortnightly instalments	$2,000	No fees if making 5 fortnightly instalments. $8 mthly fee if making 10 fortnightly repayments.	$6 for each late payment	May check your credit rating, but this won't affect your score or leave a record on your file.
Klarna	Use in most stores via the Klarna app (excludes supermarkets).	Pay in 4 fortnightly instalments. Can extend for 2 weeks for a fee.	$1,000	Up to $7 fee to extend for 2 weeks (dependent on purchase price).	$3 - $15, depending on purchase price, per late payment. Max fee is $45.	Yes - visible on your credit report but will not impact your credit score
LatitudePay	Use at affiliated retailers. Primarily non-essential items.	10 weekly repayments.	$1,000	None	$10 per late payment, capped at $10 for purchase under $50; and $50 for purchases over $50.	Yes
Laybuy	Use at affiliated retailers. Primarily non-essential items.	6 weekly repayments	Not stated	None	$10 per late payment and an extra $10 if you don’t pay in 7 days. Max $100	Yes
OpenPay	Use at affiliated retailers. Primarily non-essential items.	Payment plans of between 1 and 24 mths.	Not stated	Varies according to payment plan and merchant.	Up to $9.50 per late repayment and up to $19.50 if you don’t pay within 7 days	May do a credit check.
PayItLater	Use at affiliated retailers. Primarily non-essential items.	4 weekly repayments	$1000	None	$10 per late repayment and an additional $5 if you don’t pay after a week.	Yes, but using its own tests and document verification services.
Splitit	Use at affiliated retailers. Some retailers require a credit card	Not stated	Works on existing credit card limit.	None	None	No
Zip Pay	Anywhere	Flexible repayment schedule provided you pay a min $40 / mth	$1,500	$6/mth if you have money owing.	A late fee of $5 applies after 21 days of not paying the minimum	Yes

-Alison Cheung contributed to this story.

Did you find this helpful? Why not share this news?

Alex Ritchie

Personal Finance Writer

Alex is a personal finance writer and PR professional at RateCity, and has been writing about finance for over three years. She is passionate about closing the gender pay and superannuation gap, and aims to help young Aussies to overcome their financial apathy and better manage their finances. Alex has been published in numerous print and online outlets, including Money Magazine, Lifehacker Australia, and Business Insider.

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

More credit cards news

More news? Read more here

Learn more about credit cards

Popular searches

Student credit card

Lowest monthly repayments

Low fee credit card

Credit card deals

First credit card

0 currency conversion credit card

View all

If you own a Westpac credit card, one of the perks may be free travel insurance. If you’re eligible, you may be covered if you get sick while travelling, have lost your luggage, have to cancel a trip or have an accident while you’re on the move.

Besides these standard inclusions, the Westpac credit card insurance policy may also cover you for hospital essentials, emergency dental treatment and alternative transport if your original plans go awry. It may also cover loss of income when you get back home after being sick overseas and your pets’ boarding costs too.

If you have any queries, the Westpac credit card insurance contact number is 1800 091 710. You can submit a claim online.

Commonwealth Bank credit cards are extremely popular in Australia for everyday purchases and big ticket items alikers. A number of the card’s functions can be customised, depending on your needs and desires. If you wish to increase your Commonwealth credit card limit using the CommBank, you can usually do so on the app or via NetBank.

In the CommBank app, tap on the ‘Cards’ icon and choose your credit card. Then, click on ‘Credit Limit’ and select the ‘Increasing your limit’ option. If you don’t have the CommBank app, you can also increase your Commonwealth Bank credit card limit through NetBank. Simply log on and go to Settings, then click on ‘Product Requests’ and then choose ‘Credit Card Limit Changes’.

Once the bank has received your application, they will review your account and payment history. Based on this assessment, your application will either be approved or denied. If approved, your new limit will be applied to your card instantly.

While increasing your credit card limit may be an easy process, it’s important to remember that you should only request limits that you can manage. A high limit increases the risk of having a larger debt, even with cards that provide low-interest rate options. So, it’s important to think carefully and seek advice from people you trust before increasing your Commonwealth Bank credit card limit.

A credit limit is pre-assigned based on factors like your income, expenses, and debt by the card-issuing company. It varies from time to time based on credit utilisation and changes to your circumstances.

If your income has increased or your liabilities have reduced, you can request for an increase of your CUA credit card limit. You can lodge the request via online banking on the website, or by visiting the closest branch, or by downloading the application form and mailing it. While making the application, you may need to provide information about your income, employment status, desired limit, and the reason for the increase. The card-issuing company will assess your request before approval.

Before you apply for an increase to the credit limit, ensure your bills are paid in full and you aren’t asking for a very steep enhancement.

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

If you’re an American Express credit card customer, you may not be able to transfer money from your credit card to your bank account. However, you may be eligible for cash advances, which involves withdrawing money through an ATM.

To qualify for a cash advance, you’ll likely have to enrol for American Express Membership Rewards. Consider checking your online credit card account to see if you can withdraw a cash advance and, if so, the fees and charges you’ll incur for this transaction.

You should remember that cash advances are different from balance transfers, which were available with some American Express credit cards earlier. Balance transfers allow customers to consolidate debt from high-interest credit cards to a credit card offering a lower interest rate. If you only recently applied for an American Express credit card, balance transfers may not be available irrespective of the card you own.

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

There are a few ways to pay a credit card bill. These include:

BPAY - allows you to safely make credit card payments online.
Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
In a branch.
Via your credit card provider's app.

If you want to increase the credit limit on your American Express (AMEX) credit card, you will need to apply through the AMEX Online Services, or by calling the number on the back of your card. You may need to share personal information that the bank can use to assess whether the requested limit is suitable for you and your current financial status. Once your application is approved, your new limit will be ready for use within an hour.

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

The best way to pay off a credit card bill is to set a realistic spending budget and stick to it. Each month, you’ll get a credit card statement detailing how much you owe and how long it will take to pay off the balance by making minimum repayments. If you only make the minimum repayments, it will take you years to pay off your outstanding balance and add extra costs in interest charges. To avoid any extra charges, you should pay the entire bill.

Different states also have different rules about whether you can pay stamp duty with a credit card. Check the payment options for stamp duty on your local state revenue office website.

Some allow payments only from a savings or chequing account, whereas others allow payment through BPAY using your credit card. Also read the fine print to see if BPAY payments on your credit card are considered cash advances, as this could attract a higher interest rate.

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here.