Are you wanting to know more about the ‘enjoy now - pay later’ revolution taking the retail world by storm?
Are you seeing Afterpay, zipPay and new payment options popping up everywhere?
Have you been thinking; it all sounds a little too good to be true?
You’re not alone - I’m just as curious (and, sceptical) about how it all REALLY works! I have a multitude of questions like, why would businesses offer such a thing? How are they making money if it’s free to use? What happens if I can’t make a repayment? Does it impact my credit score?
I can obviously jump on my trusted friend Google and read an assortment of articles and ‘how to guides’ but most writers have an ulterior motive to whether they want me to be for or against the buy-now-pay-later options.
My thinking is, if I speak with my friends and colleagues about their experiences using Afterpay, it will be far less biased than what’s online, plus give me an overview of the good, the bad and the ugly.
Adding to my research, I’m going to immerse myself into the world of Afterpay, tackling my fear of credit head on! I’ll go through the process from setting up my account to making my first ever purchase, and hopefully, this will answer all of my worrying questions.
So I begin by chatting to my close friend Claire, who has a long history of overspending online. Claire laughingly tells me that she uses Afterpay all the time (which, I’m not surprised about) she says,
"It’s dangerous because I constantly lose track of what I’m spending and for me it’s out of sight, out of mind, well until… my partner sees the charges on our statement, then I have no choice but to remember."
At this point, Claire’s partner Adam (not so laughingly) jumps in and says,
"It’s such a pain because Claire tries to hide what she’s buying from me, then when the repayments come out, I’ve no idea what’s going on and it always ruins our budget."
I hesitantly ask Claire if she’s ever been late on any repayments and she says
I’ve been late on one repayment and they charged me a fee of $10 but in fairness to them, they did message me a couple of times telling me I needed to pay but I just totally forgot. After the initial $10 fee, they said I had 7 days to make the payment or I’ll incur an additional $7 late fee - they also cut off my account so that I couldn’t buy anything else.
Ok, so I think it’s fair to say that Claire doesn’t exactly use Afterpay in the most responsible way. The problem is, she’s not alone.
In a recent review of the ‘buy now, pay later’ industry, ASIC found that one in six users had either become overdrawn, delayed bill payments or borrowed additional money because of a ‘buy now, pay later’ arrangement.1
And I guess that’s what really worries me about using buy-now-pay-later services like Afterpay - you really need to be on top of what’s coming in and out of your bank account or you could easily get in trouble.
Maybe if I chat to my colleague Marco (he’s in lending), I will get a different perspective as I know he uses Afterpay all the time and loves it.
The responsible spender
I swivel my chair over to Marco’s desk and ask his opinion on AfterPay. He says
"I really only ever use it to avoid bill shock, so for example, if I have lots of weddings and engagement parties happening around the same time – I just put all the gifts and outfits on Afterpay, so I don’t have a large chunk of cash coming out at once. I guess I use it to help manage my money better."
Marco goes on to say…
But you really need to be careful because some banks look at your Afterpay and zipPay usage, when you apply for a loan. It’s a difficult one to explain because using Afterpay and zipPay won’t affect your credit score as such but if you use them irresponsibly – they could potentially ruin your chances of getting a loan from certain banks in the future.
I had no idea this was the case!
But since my chat with Marco, stories have been surfacing about how lenders are knocking back applicants because they overspent on Uber Eats, or had an outstanding Afterpay balance. The Financial Review even wrote about a Perth woman who was denied a mortgage application because of an outstanding balance on her Afterpay account.2
It just shows that you should always do your research before signing up to anything – so you fully understand the risks involved.
The happy retailer
But I don’t want to just focus on the negatives here because Marco did make some good points about Afterpay.
So maybe it’s time to hit the streets of Adelaide and find out what local retailers are saying (it has to be positive, right?).
I head straight to my local shopping centre and in seconds find a sign saying ‘Afterpay and zipPay accepted here’. I walk inside and realise it’s actually a hair salon. The owner Michelle is super friendly and more than happy to chat with me about the new payment options. She says:
I’ve been accepting Afterpay and zipPay for nearly six months now and it’s honestly been the best thing ever. I’ve seen a huge increase in business and people are coming in for multiple treatments - so they are spending more in one hit.
It’s instantly clear Michelle is a big fan of zipPay and Afterpay, and I must admit it’s nice knowing local businesses like Michelle’s are benefiting from the new payment options. And I guess the real bonus for businesses is they get paid upfront (minus a merchant fee from Afterpay), then it’s Afterpay’s job to chase repayments from the buyer.
But the Sydney Morning Herald claims not all small businesses are happy with buy-now-pay-later options like Afterpay. Stating “Many businesses are finding their existing customers who used to pay by cash or card are switching to Afterpay.” Meaning retailers are having to pay extra fees.3
So it seems retailers have a love/hate relationship with buy-now-pay-later services.
Tackling my fear
With all this in mind, I think it’s time to tackle my fear of credit and get purchasing on Afterpay.
I jump onto the Afterpay website, it takes seconds to sign-up. I only need an email address and mobile number – they text me a confirmation code and it’s all done. I just add in my card details and I can now start shopping!
But first, I look through my account page to find information about how it all works in terms of repayments and late fees. I can’t find anything! It’s also hard to locate this information on their homepage but luckily, I’ve already done my research so it’s time to get shopping…
It doesn’t take me long to find my first online purchase (#skills). I put the $90 jacket into my shopping basket and choose ‘Afterpay’ as my payment option. Afterpay texts me a code, I enter it in, and boom - it’s all done. I am seriously shocked at how quick and easy it is. I then go back into my Afterpay account and see that the first payment of $22.50 has gone out and also see when the other three equal payments are scheduled to go out.
I’m not going to lie, that was super simple, and I love the fact I’ve only paid $22.50 for a $90 jacket which I can start wearing in two days’ time!
It’s not hard to see how people get carried away with this whole ‘enjoy now - pay later’ idea (I mean, who doesn’t want stuff before paying for it?).
This brings my research to an end and although I am not a financial advisor of any kind - I think the biggest thing I’ve taken away is that yes, buy-now-pay-later services have both pros and cons but at the end of the day it’s about how you use them that’s important. If I use Afterpay responsibly and understand all the risks involved, then I should enjoy a happy fee-free shopping experience, if not, I could be on a slippery slope into debt. So I think I’ll stick to what I’m comfortable with.
1Australian Securities and Investments Commission ‘ASIC puts spotlight on the rapidly growing buy now pay later industry’ 28 November 2018
2Financial Review ‘Uber Eats, Afterpay and Netflix accounts could hurt your home loan application’ 5 December 2018
3The Sydney Morning Herald ‘'Love-hate relationship': Retailers hit by the Afterpay effect’ 3 December 2018
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