During the last two financial years, the number of Australian consumers using buy now, pay later services has increased by 500% due to aggressive marketing strategies targeting millennials from the likes of Afterpay and Zip, and ASIC wanted to gain a better understanding of the industry and identify consumer risks.
According to the latest ASIC report, there are now 2 million users of the buy now pay later scheme in Australia. It was found out that consumers see the arrangements as easy to use, convenient and less risky than other payment options. Unlike using credit cards, consumers are not charged interest and there are limits on the fees, which may be an upfront fee or account keeping fee.
These arrangements allowed consumers to spend more than they normally would and make more spontaneous purchases, 81% said these arrangements allowed them to buy more expensive items than they could otherwise afford in one payment. When used responsibly, the buy now, pay later system can help certain consumers needing to make a large, necessary purchase they hadn’t ‘budgeted for. Such system might be the answer to help them manage their cash flow.
Here 4 tips for those who want to use buy now, pay later services responsibly:
Build up a cash buffer to limit the use of buy now, pay later
Consider your purchase
Avoid late payments
Use a debit card to manage repayments
Consumers need to be in full control of their finances and use the buy now pay later system responsibly to avoid future debts or inconveniences.
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