Buy Now Pay Later was a Whitlams song in the late 1990’s about the emotional absence of a friend and bandmate due to drug use (ultimately leading to his untimely early demise).
Fast forward 20 years – and while the theme is not as dark – the title is still relevant for the burgeoning growth in “buy now pay later” finance companies like Afterpay, Zip, Laybuy, Openpay, Zumi… (the list is endless).
So what’s ‘Buy Now Pay Later’ all about and why is it attractive?
Well the concept of ‘BNPL’ is simple – relatively small purchases made in installments post purchase, meaning that the average person can seek product gratification immediately and worry about paying for the goods over a number of weeks.
So long as the agreed repayments are made, there are no interest or other costs. It is different to a credit card, whereby there are no repayments due until the end of the particular month and then a minimum repayment is required, otherwise a high rate of interest(as high as 20%) is incurred.
However, while the concept is simple and popular enough (particularly with millennial consumers who may struggle to qualify for a credit card), the simple premise remains that you should only purchase what you have the ability to repay. Otherwise multiple payment arrangements will ultimately catch up with you and you could easily end up in a lot of unnecessary (and expensive) debt.
Moral of the ‘BNPL’ story
The interest-free period is good, but make sure you have enough cash to cover the repayments, and only purchase now what you can afford in the near future.
More often than not saving for those special items and paying cash not only is more gratifying, but sets good financial habits that will last you the rest of your life.
If you require help or assistance with your cashflow or managing a budget, please don’t hesitate to contact any of the Consultants in our Private Wealth team who will be able to put you in the right direction.
Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.