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With the payment model increasing in popularity, the association warns debt will catch up with many in the new year.
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Beware of buy now pay later Christmas debt trap: CA ANZ
05 December 2022
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9 minute read
CA ANZ has urged caution surrounding buy now pay later (BNPL) models as consumers look to spend big over the Christmas season.
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The association issued its warning after the RBA’s Payment Systems Board found consumers splurged $16 billion on BNPL during 2021–22, up 37 per cent on the previous year.
“Our message this Christmas is simple: don’t land yourself in a BNPL debt trap,” said CA ANZ group executive advocacy Simon Grant.
“ASIC’s Consumer Monitor monthly survey report of quarter one of 2022 found 19 per cent of BNPL consumers surveyed cut back or went without essentials to make repayments on time.”
“While this payment method has allowed people to get products earlier than they otherwise would have, it has also created a financial black hole that some consumers are struggling to get out of.”
Mr Grant said the Treasury was consulting on the regulatory issues of BNPL but currently providers had no obligation to assess a person’s ability to repay debt, which meant that consumers needed to use added caution.
“It may be tempting to load up your BNPL account with multiple or big purchases, but when the repayments all hit at once, week in week out, you will curse the holiday period and struggle to make ends meet,” he said.
While he conceded there were occasions where using BNPL could be justified, he provided the caveat that extensive research should be completed before signing up.
“Now there may be very good reasons to use a BNPL platform, like when you have to buy an expensive new appliance and you don’t have thousands to pay for it immediately,” said Mr Grant.
“However, everyone should do their homework and plan for the repayments.”
Mr Grant extended his warning to credit cards as well, with the concern consumers’ short-term Christmas focus could come back to haunt them into the new year.
“At Christmas time it can feel like the only option is ‘credit’ at the checkout, but keep in mind that whatever you don’t pay for now you’ll need to pay for it later, often with interest - so think twice about what you put on your credit card,” he said.
“Do your research before taking out a credit card too, as some have attractive incentives like bonus points but you often have to spend a certain amount before those incentives kick in.”
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