New research into buy now, pay later schemes has raised concerns over spending habits with more than $903 million in outstanding balances.
The Australian Securities and Investments Commission conducted a review into buy now, pay later arrangements which allow consumers to purchase and obtain goods and services immediately but pay for that purchase over time.
The review found that the scheme is influencing the spending habits of consumers, especially those in a younger demographic.
Waldo Steyn, 18, uses Afterpay because he finds it a good way to buy something if he doesn’t have the money right away.
“Before I buy though, I make sure I can afford the whole amount in the period to pay it off,” he said.
“I find it easier to manage my finances using it and have been using it for a year.”
Waldo acknowledged that some people can get carried away, but it was a good system if you were thrifty with your finances.
Matilda O'Connor said that Afterpay and Zipay can be quite deceptive unless it’s researched.
“It can be a little dangerous, especially considering young adults are basing ourselves on a materialistic society and owning things and having objects is a symbol of status,” she said.
“It allows us to access that without any caution.
“There needs to be more awareness about it.”
Matilda said schools should start to include the buy now, pay later schemes in classes to teach how to budget around them.
Hayley Veitch, the owner of Cobbler rd, said offering Afterpay had increased their online traffic.
“We have been using it since it came out,” she said.
“Our main aim was to cut our laybys because we get our payment upfront, less the Afterpay fee, and it brings the online shoppers into the store.
“If they default then we don’t miss out.”
Ms Veitch said there are checks and balances in the system to make sure those who are late on payments can’t continue to spend and people should ensure they have the finances to purchase something before buying.
“More local businesses should get on board because it brings customers into the main street to shop again,” she said.
ASIC Commissioner Danielle Press said the review found many consumers enjoy using buy now, pay later arrangements and plan to continue using them, but there are some potential risks for consumers.
“The typical buy now, pay later consumer is young with 60 per cent of buy now, pay later users aged between 18 to 34 years old,” she said.
“We found that buy now, pay later arrangements can cause some consumers to become financially overcommitted and liable to paying late fees.”
As of June 30 2018, there was $903 million in outstanding buy now, pay later balances across Australia.
While you’re with us, did you know that you can now receive updates straight to you inbox each day at 6am from the Daily Advertiser? To make sure you’re up to date with all the Wagga news sign up here.