Avoid Afterpay traps
Don’t fall into the traps of the ‘buy now, pay later’ online payment system.
With more than 18,000 retailers offering Afterpay, consumers are being warned to keep control of their spending.
Afterpay offers a ‘buy now, pay later’ service online, allowing customers to make purchases and pay for them over four equal fortnightly instalments.
While there is no obligation to sign up for a loan or credit, pay upfront fees or interest charges, there are still consequences if you don’t pay off your fortnightly instalments on time.
Afterpay charges a flat $10 late fee per late payment and a further late fee of $7 if the payment is not made within 7 days, all late fees are capped at 25% of order.
RACQ General Manager Financial Planning Sloan Wilkins said Afterpay, like many financial tools, can be good and bad depending on how it is used.
“If used as a credit, rather than an extended payment facility, it can get you into difficulty like any other loan,” Mr Wilkins said.
“Make sure you spend mindfully – ask yourself ‘do I need it or want it?’ and ‘do I have to own it, or could it be borrowed or hired?’.
“Consider the old-fashioned approach of saving up for it – you’ll likely feel more in control.”
Pureprofile Nationally Representative Research, commissioned by Afterpay, in 2017 revealed that 75% of Afterpay customers were millennials (22-37-year-olds), with 23% of them using credit cards for payments.
RACQ Head of Bank Product Gary Souprounovich said using a credit type product like Afterpay to pay for things with another credit product, like a credit card, could get consumers into trouble.
“Consumers should use credit products responsibly – making sure that they can afford to pay for the items they are buying,” Mr Souprounovich said.
“Using a credit card to make payments for Afterpay purchases could result in a credit card balance being built up beyond someone’s means.”
Tips for using Afterpay wisely
- Don’t allow it to inspire purchases you wouldn’t otherwise make.
- Make sure that the repayment amount fits into your budget.
- Consider what you are going to go without to cover the payment.