‘Buy Now, Pay Later’ services have taken Australia by storm. Their appeal comes from being a payment service that is interest-free and time-convenient among other things. As Property Lawyers and Licensed Conveyancers Sydney, Platinum Lawyers wishes to educate consumers on the need for responsible spending when using such services.
Providers such as Afterpay, Zip Pay, Brightepay, Openpay, Certegy Ezi-pay have increased in popularity by leaps and bounds and show no signs of slowing down, with a 400 percent growth between 2016 and 2018. The flip side of the popularity of such services is that many consumers are finding out that using such payment options could negatively affect their credit health – and their chances of securing a home loan – if they’re not careful.
If you’re an existing customer of a Buy Now, Pay Later service or are thinking of becoming one, then read on to find out how you can use such providers responsibly, without allowing it to adversely affect your credit score.
What Is a Buy Now, Pay Later Service?
A Buy Now, Pay Later arrangement allows you to order or purchase a product and pay it off in installments, similarly to layby. They allow users to immediately delay payments which can take place over several weeks or over a longer period depending on which provider you choose.
Could Using a Buy Now, Pay Later Service Affect My Credit Score
Yes. Not all Buy Now, Pay Later providers will check your credit history which means you could end up ‘biting more than you can chew’ by taking up more credit than you can afford. Although not all Buy Now, Pay Later providers check credit history, failure to make payments in time can mean penalties that directly affect your history. Some of the service providers also state in their terms and conditions that they reserve the right to report any negative activity on your account (such as late payments, missed payments and defaults) to credit reporting agencies.
There have been some instances were applicants for a home loan were rejected by banks as a result of their buy-now-pay-later activities.
I Still Want to Use a Buyer Now, Pay Later Provider. How Can I Do So Responsibly?
There are several ways you can use a Buy Now, Pay Later provider while ensuring that you won’t run into any major issues.
- Use Only One Buy Now Pay Later Account: Keep it simple by using only one account you will be able to keep track of how much you have spent and not run into trouble making payments.
- Set a Budget and Stick to It: It can be tempting to use a Buy Now, Pay Later account to splurge on purchases, but this can quickly get you into trouble. Be smart about setting a budget for yourself so that you know that will be able to pay it off it in time without trouble.
- Link to a Debit Card: Linking a Buy Now, Pay Later account to your credit card will only mean trouble, as doing so can easily increase your monthly credit balance as well as increased debt from interest.
- Keep Tabs on Your Funds and Payments: Buy Now, Pay Later providers automatically deduct money from your debit card, so it Is important that you have sufficient funds in your account. Furthermore, it is essential that you are aware of when money will be deducted and check regularly to make sure there are no issues. You can set up notifications to keep up to date on everything and to keep track of purchases you’ve made.
- Read the Terms and Conditions First: Despite sharing some similarities, Buy Now, Pay Later services are an alternative to paying upfront, lay-by or by credit card. By reading the terms and conditions you won’t run into any unwanted surprises including how your personal information is being handled.
Looking for a licensed Conveyancer in Sydney? Contact Platinum Lawyers Sydney today at (02) 8084 2764.