Beware of buy now, pay later offers this holiday season

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.


cc1.jpg
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’.


cc2.jpg
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.
Key Takeaways

  • ‘Buy now, pay later’ and credit card services may seem like a stress-free way to budget for Christmas gifts, but they can actually end up being more expensive in the long run.
  • These services can also negatively impact your credit score, making it harder to borrow money in the future.
  • If you're on a tight budget, it's best to take advantage of sales and look for bargains at second-hand stores or online.
What can you say about this, members? Share with us your thoughts in the comments!
 
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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.


View attachment 9036
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’.


View attachment 9037
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.
Key Takeaways

  • ‘Buy now, pay later’ and credit card services may seem like a stress-free way to budget for Christmas gifts, but they can actually end up being more expensive in the long run.
  • These services can also negatively impact your credit score, making it harder to borrow money in the future.
  • If you're on a tight budget, it's best to take advantage of sales and look for bargains at second-hand stores or online.
What can you say about this, members? Share with us your thoughts in the comments!
If these companies don’t consider peoples ability to pay they should wear the defaults. That would soon make them be more careful as to who they extend credit.
 
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If these companies don’t consider peoples ability to pay they should wear the defaults. That would soon make them be more careful as to who they extend credit.
Not really the people wanting to overspend, live beyond their means should wear the default. After all they are the ones using the service. If you can't afford to pay in cash or use a layby service then go without.

Too many people are living on the "tick" and it catches up with them, can't have 3 x 1000 dollar credit cards maxed out all at once and expect to pay them all by the 55? day fee free period, using one to pay the other never works.
 
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One Christmas I bought on credit. Among other things, husband got a lawnmower, boys bunkbeds and my mother a wheelbarrow and garden tools. Looking back I think they were odd presents but everyone was delighted. I was tired of just getting by and wanted a great Christmas. Now I have enough savings to buy presents in the months leading up to Christmas.
 
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You have to be of exceptional character to have the strength of will to not overspend when the afterpay (or whatever) repayments sound so small. To me it is the beginning of the slippery slope, you only have to be late with one payment and suddenly you owe a fortune.
I have one credit card with a fairly small limit that I know I can repay in one lump sum at the end of the month. To my mind the only thing worth getting into debt for is your home but even then you should buy within your means and pay it off in the quickest time possible. ;)
 
You have to be of exceptional character to have the strength of will to not overspend when the afterpay (or whatever) repayments sound so small. To me it is the beginning of the slippery slope, you only have to be late with one payment and suddenly you owe a fortune.
I have one credit card with a fairly small limit that I know I can repay in one lump sum at the end of the month. To my mind the only thing worth getting into debt for is your home but even then you should buy within your means and pay it off in the quickest time possible. ;)
So agree with you, I do exactly the same.
If you don't own your home by the time you retire you're stuffed.
Life on the pension and paying rent would be a nightmare.
I count my blessings every day.
 

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Not really the people wanting to overspend, live beyond their means should wear the default. After all they are the ones using the service. If you can't afford to pay in cash or use a layby service then go without.

Too many people are living on the "tick" and it catches up with them, can't have 3 x 1000 dollar credit cards maxed out all at once and expect to pay them all by the 55? day fee free period, using one to pay the other never works.
These companies have taken advantage of the vulnerable and ignorant. They have skirted the consumer credit laws. They and their investors should be held accountable as should their lobbyists in parliament.

Temptation is difficult for some. Others have mental illnesses and just don’t understand personal finances. Even pawn shops have laws preventing them taking advantage of the vulnerable.
 
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