A quarter of Australians are using “buy now, pay later” services such as Afterpay and Zip to make secret purchases behind their partner’s back, new research has revealed.
According to comparison site Mozo, Aussies are being tempted into these purchases due to easy digestible payments, but they “aren’t proud of their spending habits” and instead hide it from their partner.
Not only are we hiding purchases, Aussies are also purchasing items they usually wouldn’t, with 60 per cent saying they are influenced to purchase items as they can pay it off later.
This overspending and pressures brought on by COVID-19 sees younger Australians more likely to shut down their account, with 38 per cent of respondents aged between 25-34 saying they have done so in the last three months.
“Buy now, pay later has enjoyed a meteoric rise in Australia, with user numbers growing from 400,000 in 2016 to 2 million in 2018, but COVID-19 has proven to be a curveball that no one could foresee. The future of buy now, pay later is looking a little more shaky – one in four users cancelling in the past three months is a sizable exodus,” said Mozo director Kirsty Lamont.
Hannah May from Western Australia is an example of one of many young Aussies who have made the call to shut down her buy now, pay later account due to the financial uncertainty COVID-19 presented.
She had her account for two years but found she was spending beyond her means. “I definitely used buy now, pay later for spur of the moment purchases on clothing and skincare, but towards the end, my spending escalated to $500 a fortnight.
“I became sick of living paycheck to paycheck. And now that I’ve closed off my account, I’m not tempted to spend beyond my means,” she said.
Despite encouraging greater spending, buy now, pay later (BNPL) services are helping Australians through a difficult COVID-19 period, the research also found.
Half of users are putting essential items like food, warm clothing and appliances on their accounts, using the platform for necessary purchases.
Under COVID-19 lockdown, clothing remained the most popular category of spending (30 per cent), but this was followed by essential items like groceries (12 per cent) and food and beverages (12 per cent).
Non-essential spending on items like electronics, homewares and self-care experienced a decrease in purchasing frequency.
Half of Aussie BNPL users admitted they were buying essentials on the platform to “get by”.
“Many buy now, pay later users are financially stressed and struggling to meet their payment obligations. If you do find yourself uncertain about how you’re going to make repayments, be proactive about your situation and reach out to your provider.”
“Don’t wait for the late fees to hit. Providers like Afterpay will make an assessment based on your financial situation, whether that’s the need for a time extension or changing the repayment amount,” Ms Lamont said.
Nearly 70 per cent of users admitted they are feeling “financially stressed” about purchases they have made, with one in four BNPL users opting to cancel their account in the last three months.
For many, getting rid of BNPL is not an option, with scheduled payments still set to come out of their account.
“Buy now, pay later can be a good way to manage your cash flow, but before you make a purchase, weigh it up and ensure it suits your financial situation,” she concluded.
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We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians
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