Buy now-pay later but watch out
An increasing number of Kiwis are choosing to space out the cost of their spending with buy now-pay later options – but there is a warning to take care.
A NZ Post report on e-commerce found 12 per cent of online shoppers used the part-payment systems and 70 per cent of the buy now-pay later users were young women.
According to the report, 20 per cent of money spent on clothing and footwear in New Zealand went via post-pay options.
The services offer shoppers the option of receiving goods immediately while paying them off in instalments, interest-free, over a number of weeks.
However, unlike credit cards and personal loans, buy now-pay later products don’t come under the Credit Contracts and Consumer Finance Act.
Most of the companies providing post-pay products have limits between $1000 and $1500 for individual purchases.
But an Australian company, Payright, has confirmed it is looking at expanding into the New Zealand market by the end of the year.
Payright offered a $20,000 limit to be paid over 36 months.
A spokeswoman for FinCap, a nationwide budget advisory charity, said it wanted the Government to include buy now-pay later products in proposed changes to the credit contracts legislation. The organisation’s submission said buy nowpay later services needed to be considered a credit product.
‘‘While the payments do not incur interest, fees are charged.
‘‘There is no requirement to undertake an affordability assessment as there is for other forms of credit when giving a person a credit limit for a buy now-pay later scheme.’’
In some cases buy now-pay later could be a better alternative to people using a credit card or taking out debt, the spokeswoman said.
‘‘However, before using buy nowpay later schemes people should consider saving for the product.
‘‘You should also make sure you have a good idea of what your cashflow situation will be like over the period of the arrangement so that you avoid defaulting on your payments and incurring late fees.’’
The report described the buy now-pay later option as a very appealing proposition, ‘‘particularly for millennials as it fits in with their generation’s ethos of wanting everything now’’.
More than 228,000 Kiwis have already signed up to buy now-pay later schemes and an increasing number of merchants are offering it as a payment option.
The popularity of modern versions of layby has coincided with a noticeable drop in credit card debt over the first half of 2019.
Reserve Bank figures show a 3.6 per cent decrease in money owned on credit cards between January and July.
Consumer NZ head researcher Jessica Wilson said the buy now-pay later scheme could seem attractive but people needed to be confident they could pay on time.
‘‘If you miss a payment, you will be hit with late payment fees.
‘‘Payment defaults could also affect your credit score, making it harder to get finance in the future,’’ Wilson said. ‘‘Consumers using these schemes don’t have the same right to cancel the deal as they do with traditional laybys. There is also no cooling-off period as there is with credit purchases covered by the Credit Contracts and Consumer Finance Act.’’
A Commerce Commission spokeswoman said that in the past 12 months the commission had received 20 complaints relating to the largest companies in the buy now-pay later market.