Pay-later option an invitation to spend
Ask Susan
Q. If I’m shopping and am offered the option of Afterpay, Laybuy or some other delayed payment method, should I take it? Or are there hidden costs?
A. Lots of new payment options have become available, which allow you to spread the cost of a purchase over a number of weeks. The main ones are Afterpay, Laybuy, Oxipay and PartPay.
The benefit to the customer is obvious: You get what you want immediately, but you only pay for a portion of it upfront.
Usually, the cost of this option is carried by the shop.
They pay a percentage fee – sometimes about 5 per cent of each transaction. In return, they hope you’ll be more likely to buy more, because you’ll be paying it off over four or six weeks.
The benefit for the customer, compared to chucking it on a credit card, is that there is no interest attached. It’s free use of someone else’s money. That’s helpful if you have, say, a revolving credit account and you can offset an interest charge by having the money sitting in your account a bit longer.
In theory, it’s a savvy way to manage your money.
But if you miss a payment because there isn’t enough money in your account when it’s due to go out, these services start to become costly.
Laybuy charges $10 for payments not made on time. Afterpay applies the same fee, then another $7 if the payment is still not made a week later. Oxipay says it might charge $30 on top of the initial $10, if it’s still waiting after a week. PartPay charges $8 every week a payment is outstanding.
The same thing that makes these systems appealing can also be its biggest problem – it doesn’t feel like you’re spending as much money, so you may be inclined to spend more than you really should.
The message is to keep track of what you’re signing up for. Don’t get carried away and take on more debt than you can handle.
Have a question? Email susan.edmunds@stuff.co.nz