Beware of buy now, pay later offers this holiday season
- Replies 9
As the holidays approach, most of us are starting to feel the pressure of finding the perfect gifts for our friends and family. However, amid inflation, it has become difficult to budget our spending.
It’s no wonder why people are gravitating towards ‘buy now, pay later’ services since they appear to be a ‘stress-free’ way of shopping – which seems too good to be true.
So, before you jump on these offers this holiday season, there are a few things you should know.
‘Buy now, pay later’ programs and the availability of credit cards seem to be the perfect solution to pay bills and necessities, especially in these tough economic times.
According to a survey conducted by Afterpay – a digital payment platform with a popular ‘buy now, pay later’ service – one in four people plan to spend more money on gifts this year than they did in 2021. The average amount they’re willing to spend is anywhere between $50 to $150.
Over half of those surveyed answered they’re likely to buy more if the items are on sale. Two in five people take advantage of holiday sales, such as Black Friday and Cyber Monday sales.
Katrina Konstas, the Country Manager for Afterpay, explained that the holiday season doesn’t have to be stressful, since their services let people budget their expenses easily and offer their customers the choice to pay in four instalments.
‘This will allow Aussies to show how much they care for their loved ones, while still sticking to a budget and managing the financial pressure of the holidays,’ Ms Konstas said.
But as helpful as these offers are at first, it can be too easy to get into debt if consumers can’t pay on time. The question is, will this have a significant impact on your credit score?
Founder of It’s Simple Finance and Finance Expert Joseph Daoud said: ‘While it doesn’t affect the credit score, governments have been thinking about law changes to have this as a form of credit.’
He also explained that money lenders will look at services such as Afterpay or credit cards as detractors – it’s considered as ‘overspending outside your means’.
‘This is all about people living within their means when it comes to Christmas shopping and not overspending,’ the Finance Expert explained.
The National Debt Helpline also warned people against buying on credit. Specifically, how difficult it could be to track your spending, and how easy it is to drown in debt and bills if you can’t afford repayments on time.
Another issue they pointed out is how the ‘purchase cost’ can seem cheaper when split into instalments. However, people can lose track of how much is due – especially if you’ve made more than one purchase on one day using more than one account.
Not only that, but the fees can add up quickly – such as late payment fees or collection fees. If you use credit cards often and can’t pay on time, your credit score will be affected. If your credit rating is low, you’ll have a hard time applying for loans.
We covered the story of a woman who got caught up in debt because of ‘buy now, pay later’ programs. You can read about that here.
Mr Daoud mentioned that stores would be holding 30 to 50 per cent off items from now until the end of the month, making it a great time to buy cheap Christmas gifts. He also suggested looking through thrift stores or online marketplaces for good finds.
If you need more ideas on budget buys this Christmas, you can browse through our forum here.
What can you say about this, members? Share with us your thoughts in the comments!
It’s no wonder why people are gravitating towards ‘buy now, pay later’ services since they appear to be a ‘stress-free’ way of shopping – which seems too good to be true.
So, before you jump on these offers this holiday season, there are a few things you should know.
‘Buy now, pay later’ programs and the availability of credit cards seem to be the perfect solution to pay bills and necessities, especially in these tough economic times.
According to a survey conducted by Afterpay – a digital payment platform with a popular ‘buy now, pay later’ service – one in four people plan to spend more money on gifts this year than they did in 2021. The average amount they’re willing to spend is anywhere between $50 to $150.
Some ‘pay-in-instalments’ services bring more harm than good to consumers. Credit: Pixabay in Pexels
Over half of those surveyed answered they’re likely to buy more if the items are on sale. Two in five people take advantage of holiday sales, such as Black Friday and Cyber Monday sales.
Katrina Konstas, the Country Manager for Afterpay, explained that the holiday season doesn’t have to be stressful, since their services let people budget their expenses easily and offer their customers the choice to pay in four instalments.
‘This will allow Aussies to show how much they care for their loved ones, while still sticking to a budget and managing the financial pressure of the holidays,’ Ms Konstas said.
But as helpful as these offers are at first, it can be too easy to get into debt if consumers can’t pay on time. The question is, will this have a significant impact on your credit score?
Founder of It’s Simple Finance and Finance Expert Joseph Daoud said: ‘While it doesn’t affect the credit score, governments have been thinking about law changes to have this as a form of credit.’
He also explained that money lenders will look at services such as Afterpay or credit cards as detractors – it’s considered as ‘overspending outside your means’.
While these services are alluring, they could leave you struggling in the future. Credit: Monstera in Pexels
‘This is all about people living within their means when it comes to Christmas shopping and not overspending,’ the Finance Expert explained.
The National Debt Helpline also warned people against buying on credit. Specifically, how difficult it could be to track your spending, and how easy it is to drown in debt and bills if you can’t afford repayments on time.
Another issue they pointed out is how the ‘purchase cost’ can seem cheaper when split into instalments. However, people can lose track of how much is due – especially if you’ve made more than one purchase on one day using more than one account.
Not only that, but the fees can add up quickly – such as late payment fees or collection fees. If you use credit cards often and can’t pay on time, your credit score will be affected. If your credit rating is low, you’ll have a hard time applying for loans.
We covered the story of a woman who got caught up in debt because of ‘buy now, pay later’ programs. You can read about that here.
Mr Daoud mentioned that stores would be holding 30 to 50 per cent off items from now until the end of the month, making it a great time to buy cheap Christmas gifts. He also suggested looking through thrift stores or online marketplaces for good finds.
If you need more ideas on budget buys this Christmas, you can browse through our forum here.
.png){kind=icon}
