Is Buy Now, Pay Later looking tempting this Christmas? It pays to be careful.

While Buy Now, Pay Later (BNPL) may look like a handy way to spread payments, it’s not without risks. Did you know there are late fees if you miss a repayment? That pay later quickly turns into pain later.

We’ve all been there – you see a great sale on Black Friday but don’t quite have enough money saved up so you put it on credit. (And yes BNPL is credit/debt). And then December rolls around and it’s time to buy presents for your whānau and friends. Why not take out another BNPL for that? Well, that’s where things can start to go wrong. It can be easy to lose track of what you’ve borrowed, and before you know it, you’re not keeping up with the repayments and those late fees start adding up.

5 tips for spending safer when using Buy Now, Pay Later

  1. Try not to be tempted to take out more than one at a time.
  2. Use Buy Now, Pay Later to buy larger ticket items only if you have to. Better yet, save up for it instead.
  3. If you must take out more than one of these, list them all and set reminders in your phone when repayments are due.
  4. Make sure to have enough funds in your account when repayments are due, so you don’t get charged late fees.
  5. Don’t get left with a black mark on your credit rating by missing repayments and not paying off any penalties.

Christmas hacks to make your money go further

The last couple of years have been tough, and we’re all in need of a great Christmas with our whānau. But the last thing we want is to go into the new year with new debt. If Buy Now, Pay Later is looking tempting because Christmas doesn’t seem possible without it, these 12 hacks will help.

READ THE HACKS

Buy Now, Pay Later FAQs

How does Buy Now, Pay Later work?

Buy Now, Pay Later is a type of debt. It’s a way of borrowing without interest or fees (the retailer covers these costs), as long as you use them right. When you buy something, you pay a small part and the BNPL company pays the retailer the rest. You receive your purchase straight away. Then you pay the company back in instalments. Most maximum limits on BNPL run from $1000 to $1500. But Humm's "Big Things" loans are a bit different and can go as high as $10,000, with the repayments spread out over as long as 24 months.

What’s the catch with Buy Now, Pay Later?

Going into debt is always a bit risky, since circumstances might change and it could become difficult to repay. Sometimes it’s hard to tell what might happen.

The aim is to avoid all late fees, otherwise we end up paying more for something than we intended to. These penalties can end up as high as 25% of the original price – so that $1000 flat screen could end up costing $1250 if not repaid on time. The other catch with BNPL is that we can get “upsold” on buying more than we planned to.

Is Buy Now, Pay Later a good idea?

BNPL can be a great way to spread the expense of a purchase and not get charged any interest but you need to use it sparingly and know the risks. As soon as you’re late with a repayment you’ll be stung with late fees. And if you keep failing to make payments then it could negatively affect your credit rating and ability to borrow money later on.

How many Buy Now, Pay Later purchases can I have going at one time?

A typical limit with a BNPL company is up to $1500, and you can borrow with more than one BNPL company. But having too many of these going at one time is tricky to manage – it’s much easier and safer to have only one going at a time. If you must take out more than one of these, list them all and set a reminder in your phone when repayments are due.

Is Afterpay a loan?

Yes. When you buy something using BNPL like Afterpay, Laybuy or Humm, you pay a small part straight away and the BNPL company pays the rest. You receive the item straight away. Then you pay the company back in instalments – typically three fortnightly repayments. This type of loan, if you make the repayments on time, is interest-free. But costs can add up if you miss a payment.

What happens if I miss a payment with Buy Now, Pay Later?

You’ll be charged a late fee, which is typically a flat fee of $10 or $20. But if you keep missing payments, the penalties can go as high as 25% of the original price you paid.