Lucinda Caroll

After, “AfterPay”

Words By Lucinda Caroll

Illustrations by Natalie Taki

Illustrations by Natalie Taki

‘Buy now, pay later’ services have become one of the most popular ways for many young adults to purchase items both online and in-store. Increased online shopping during the coronavirus pandemic has only magnified the problem and is creating a debt trap that many young adults will struggle to escape.

Differentiating themselves from the long-standing lay-by system, ‘Buy Now, Pay Later’ services – such as AfterPay, Zip and Sezzle – allow the consumer to receive their purchase immediately without paying the full amount upfront. In a climate of fast fashion and rampant consumerism, these services provide an easy way to overspend in order to keep up. The increasing use of ‘Buy Now, Pay Later’ services create a number of potential risks for young adults keen to maintain their quality of life as income stalls due to the pandemic. “For some people, even a small amount of ‘Buy Now, Pay Later’ debt can be enough to tip them over the edge,” explained Fiona Guthrie, Chief Executive of Financial Counselling Australia. 

The model, which typically allows customers to pay off purchases in instalments, has seen massive growth in the last few years. This has been further accelerated amid the coronavirus pandemic with a majority of young adults stood down from their jobs, losing their steady income stream. Lily Slater, a user of ‘Buy Now, Pay Later’, has experienced the unfortunate downsides of taking advantage of these services, spiralling her into debt.

Lily, a 20-year-old university student from the Gold Coast, was a frequent online shopper when ‘Buy Now, Pay Later’ options were introduced by her favourite online retailers. As a full-time student with only a part-time job, she elected to use this payment option and stopped paying for her online purchases in full. With the first instalments for each purchase being only a fraction of the full price, she soon found herself purchasing more items, mostly clothing, on a weekly basis. She quickly realised her instalments were falling due around the same time, forcing her to make bulk payments in order to avoid incurring late fees. Only then did she realise how far she’d overspent her budget; this is just one of the many dangers that ‘Buy Now, Pay Later’ poses to consumers susceptible to impulse buying. 

There are a number of traps that consumers need to consider before using these payment methods. The most important thing to consider is whether you can afford the purchase in the long term. By delaying payments through instalments, the consumer needs to consider future bills or expenses as these could make it difficult to meet future payments. Furthermore, falling behind on instalments leads to late fees that only add to your debt. Unfortunately, many young Australian’s have fallen into this trap, including ‘buy now, pay later’ user, Lara Montgomery.

Lara had a similar experience to Lily, where her addiction to online shopping during the pandemic nearly sent her broke. After losing her job earlier this year, Lara started spending her money using ‘Buy Now, Pay Later’ services. Once she began to make multiple purchases, they piled up, resulting in each instalment requiring payment on the same day. As a busy university student, she completely missed the due date for her multiple purchases, which left her facing the consequences of a 10-dollar late fee per purchase. This caused her to fall into debt, forcing her to pay off these purchases before the following due date in order to avoid incurring an even greater fee. 

One of the negative long-term effects of ‘buy now, pay later’ services is damage to their credit score. This can create significant problems in the future when attempting to borrow money for car or housing loans, or when applying for a credit card.

Sarah Cuartas is another victim who accrued extra debt through her use of ‘Buy Now, Pay Later’ services. Sarah missed the deadline for her payment, resulting in significant late fees. She says, although these services can be helpful to delay payments to meet future income, there is a tendency to overcommit, creating financial stress and hardship. Sarah suggests users should be very cautious of what they are spending. Sarah says “it is very addictive and you can become too relaxed.” 

With many young casual workers earning more from Job-keeper subsidies than they typically would, it is imperative they consider that this extra income may be short-lived and therefore, should be cautious not to financially overcommit; The spiral into debt can be extremely difficult to exit.

To avoid ‘buy now, pay later’ becoming ‘buy now, regret later’ avoid impulse purchases, keep to spending limits and set payment reminders to avoid incurring late fees. These companies claim to be user-first, but the duplicitous nature of their service begs the question: is staying up to date with the latest trends worth risking your entire financial future?