The Dark Side Of Buy Now Pay Later

18 Mar 2022

If you’re one of the many Australians who regularly use ‘Buy Now Pay Later’ platforms like Afterpay and ZipPay, you may not be aware of the long term effects.


Considered by many to be one of the best Australian exports since Vegemite, Afterpay is also equally as polarizing. However, there’s no denying that the market for Afterpay’s “reverse layby” model cannot be overstated – especially in the midst of a global pandemic, where many have found financial relief in the business model. 

Founded in a suburban Sydney garage in 2014, Afterpay as we know it is now regarded as one of the pioneers of the ‘Buy Now Pay Later’ (BNPL) payment platforms that have since taken the world by storm. In theory, it’s as simple as receiving your goods, and paying them off later in four fortnightly, interest free installments – so what’s the catch?

How Buy Now Pay Later Can Affect Your Financial Health

The primary attraction of using ‘Buy Now Pay Later’ services like Afterpay, ZipPay and Klarna is that for shoppers, it’s all too easy. To sign up, all you need is to be aged over eighteen, hold a valid Visa or Mastercard debit or credit card in your name, and to be deemed capable of entering into a legally binding contract. 

Users sign up via a verified email address, phone number and photo identification. Once this is approved – which is almost instant – users are free to get busy shopping either online or instore with selected retailers. With no interest and no scrutinising approval process, everyday consumers now have access to funds that they may or may not already have at their disposal. 

However, it’s this false sense of security that has seen a growing number of financial experts express their concerns linked to consumers relying too much on ‘Buy Now Pay Later’ platforms, particularly when used for everyday living expenses. In addition, many in the financial sector believe that using them can enable overspending, and their usage can even act as the catalyst for a debt spiral. 

If you’re unfamiliar with the term, a  debt spiral is when an individual, company, or even country falls into major debt over time. Although it doesn’t usually happen overnight, the reason behind this is simply because individuals don’t know how to use the credit available to them in a safe and proper manner, and can include credit cards or ‘Buy Now Pay Later’ platforms. 

The role ‘Buy Now Pay Later’ services have in encouraging a debt spiral is that users can quickly get caught spending far more than they intended, or more than they can actually afford to repay. While the original purchase cost may seem cheaper when split up into smaller repayments, many people lose track of how much is due and when, particularly if using multiple platforms. 

It’s also worth noting that having multiple ‘Buy Now Pay Later’ and accounts on your credit report can impact any future credit applications, such as for a car loan or home loan. If a user makes a late payment or misses a payment all together, these are also logged on your credit file as a default, as well as being faced with late fees on top of the actual repayment itself. 

Although this may change in the not so distant future, ‘Buy Now Pay Later’ lenders are not covered under the National Consumer Credit Protection Act, which means they don’t have the same obligations as banks and other lending institutes to check that consumers can actually afford the repayments, or to have financial hardship provisions in place. 

While using ‘Buy Now Pay Later’ platforms can be quite safe when compared to the hefty interest rates and fees linked to credit cards, personal loans, and payday loans, if you miss a repayment or become over reliant on these types of services, anyone can easily end up on the fast track to a debt spiral without even realising it. 

How To Save Money On Your Monthly Bills

Kyco is a member based buying group that ultimately aims to save Australians money on their energy, health and insurance bills. The more members we have, the more negotiating power we have to arrange low, long-term deals with service providers.

Kyco doesn’t play one provider off against another taking commissions of up to 30% like most comparison sites. Instead, we’re leveling the playing field with a low 3% capped commission. It’s free to become a member, and with no lock in contracts or unexpected price hikes, spending less on your annual bills has never been easier. 

To be amongst the first to revolutionise how much ordinary households should be paying for bills, join us today and help make the cost of living more sustainable for everyday Australians.