Buy now, pay later customers skipping meals and essential bills to make payments

Buy now, pay later customers skipping meals and essential bills to make payments

Monday 16 November 2020: Some Australians are skipping meals, household bills and mortgage repayments as a result of overspending using buy now, pay later platforms, according to ASIC’s report into the industry released today.

The report found over a 12-month period:

  • 21% of buy now, pay later (BNPL) users surveyed missed a payment.
  • 20% of BNPL users surveyed cut back or went without essentials, including meals, as a result of overspending on these platforms.
  • 15% of BNPL users surveyed had taken out additional loans to make ends meet.
  • 1 in 5 users surveyed missed or were late paying other bills to make BNPL repayments. Of these:
    • 44% missed paying household bills
    • 32% missed credit card repayments
    • 22% missed mortgage repayments.

Consumer advocate RateCity.com.au believes BNPL providers should do more to protect their customers from falling into financial hardship in their upcoming code of conduct, including:

    • An industry-wide cap on late fees.
    • Easy-to-find information about late fees and hardship programs.
    • Proactive efforts to alert customers to the pitfalls of impulse shopping and overspending.
    • Increased education around how to budget and manage debt, particularly for younger Australians.
    • A minimum level of assessment for new customers.
    • Ways to mitigate customers getting into multiple debts across multiple platforms.

RateCity.com.au research director, Sally Tindall, said the BNPL industry had a unique opportunity to address the issues highlighted in today’s report in their upcoming code of conduct.

“ASIC has found one in five users are getting into financial trouble as a result of overspending on these platforms, from skipping meals to skipping mortgage repayments. These findings need to be addressed – not brushed over or refuted,” she said.

“Buy now, pay later platforms can’t just rely on the number of hardship applications to know if their customers are falling behind financially.

“Many BNPL platforms automatically deduct repayments from customers’ accounts, which means they can’t see when they go into overdraft or can’t pay their bills.

“It’s time for the industry to accept some people are getting into strife, and, put forward policies that will address these issues.

“Greater education around the pitfalls of overspending and impulse buying will help customers use these services, and other forms of credit, wisely,” she said.

Afterpay is the biggest BNPL platform with over 3.4 million customers in Australia and New Zealand and around 48,000 merchants.

“While consumers can find themselves in financial hot water after using Afterpay, the platform puts customers on a much tighter leash than most credit cards,” she said.

“Afterpay is, in many regards, doing the right thing by its customers, with strict spending limits and tough rules around missing repayments. But more can always be done to help protect customers.

“The industry has a unique opportunity to address these issues through self-regulation. They’ve already got some good protections in place to stop customers getting on a debt treadmill.

“Let’s see if they can take this one step further and address the problems highlighted in ASIC’s report,” she said.

How to avoid getting into trouble using BNPL platforms:

  1. Read the terms and conditions and understand what fees you could get hit with.
  2. Set yourself strict spending limits.
  3. Limit yourself to one platform, and one purchase at a time.
  4. Don’t impulse buy. Sit on any major purchases for at least 24 hours.
  5. If you get into trouble, pull the pin and call for help. Each platform should have a hardship policy available.

Key BNPL services available in Australia – excludes personal loan payments plans.

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 including eBay & Coles. 4 instalments over 8 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  
BrightePay Home solar, battery upgrades and products Between 6 months and 60 months $1,000 - $30,000 $1 a week $4.99 per late payment, $capped $49.99 per year Yes  
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  
Fupay Anywhere 8 weekly personalised repayments $200 on Fu Cash, $500 on Fu Bills & Card Fu Card has a one-off set up cost of $5. Not states No  
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 making10 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 10 days as a one time courtesy.

$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, if you miss 3 or more payments your LatitudePay limit will be decreased. 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. Yes  
 
 
OpenPay Use at affiliated retailers. Primarily non-essential items. Payment plans of between 1 and 24 mths. Up to $17,500 An initial payment will be required at the time of purchase. Most of the time, this initial payment will be 20% of the purchase price. Details of the late fees included in the application and approval email, depends on individual payment plans. May do a credit check.  
Payright Use at affiliated retailers. Primarily non-essential items. Flexible repayment schedule provided up to $20,000 Establishment fee from $0 up to $89.95. A monthly account fee $3.50 (pro-rata) with each repayment & $2.95 payment processing fee which is also added to each repayment. Late fees of up to $12.95. Yes  
PayItLater Use at affiliated retailers. Primarily non-essential items. 4 weekly repayments

$1,000

None $10 per late repayment and an additional $10 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 + BPAY Flexible repayment schedule provided you pay a min $40 / mth

$1,500

$6/mth if you have money owing. Late payment fee of $5 after 21 days of not paying the minimum. Yes  

Source: RateCity.com.au

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

Advertisement

RateCity

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

Advertisement

Learn more about savings accounts

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.