‘Buy now pay later’ products such as Afterpay and zipPay have become increasingly popular in Australia, especially this year.
In the lead up to Christmas we have had many questions about what these products are, if they are completely interest-free, and whether using these products affects your credit rating.
We want to answer some questions for you, as well as give you some helpful tips on how to use Afterpay and zipPay effectively.
What are Afterpay and ZipPay
Afterpay and zipPay are two very similar products, and the market leaders, that allow customers to make retail purchases both in-store or online and repay those purchase in installments. Both products deliver the same ‘buy now pay later’ service.
Are Afterpay and zipPay completely interest-free?
With both of these ‘buy now pay later’ products, you get a certain amount of credit, up to $1000, to make retail purchases online or in store. These purchases are interest-free. But these products are not fee-free and this is where consumers need to be careful. Both products have late payment fees involved, as well as service fees if the full balance is not repaid during a certain period of time. Fees may be up to $10 per late payment. Always read the full terms before you sign up.
Also, consider interest on an existing credit card you may have. To use Afterpay and zipPay you must link your account to a debit or credit card. If you are linking your Afterpay or ZipPay direct debts to a credit card, you will be charged interest from your credit card provider according to their terms.
Will this affect my credit file?
Afterpay and zipPay transactions are not recorded on your credit report. However, just like most credit-related products, if you fail to make payments and your account is referred to a creditor, these services may have a detrimental impact on your credit file. If you have too many ‘buy now pay later’ agreements in place and these repayments are breaking your budget, try your best to ensure you meet all repayment dates to avoid credit consequences.
Some tips to keep in mind:
- Only buy what you know you can reasonably afford. Making a budget can help. For example, limit yourself to one purchase per fortnight!
- If you already have a maxed out credit card, try to repay some or all of it before using other credit products such as Afterpay and zipPay
- Only use one ‘buy now pay later’ service at a time to avoid confusion and late fees
- If you notice you are overspending, take early steps to break these bad habits. Speaking to a close family or friend may help
During the Christmas period, it can be easy to overspend. Plan ahead, make a budget and have fun! And don’t forget, we are always here for you if you have any finance questions, big or small. Just call us on 1300 652 842.