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Beware of Boxing Day hangover debt. - featured image
By Michael Yardney

Beware of Boxing Day hangover debt.

Australians are set to spend $19 billion in the post-Christmas sales, and over $2.6 billion on Boxing Day alone, but with more shoppers opting to ‘buy now and pay later’ RateCity is warning shoppers not to get carried away.

While buy now, pay later services such as Afterpay charge no ongoing fees or interest, it can still leave a nasty sting in the tail if you don’t make your repayments on time.Money Back

Shoppers that fail to meet all four instalments using Afterpay can get slugged up to $68 in fees or 25 per cent of the purchase price, whichever is lower.

For example, if a shopper made one $150 purchase on Afterpay and failed to meet the repayments, they would be up for $37.50 in fees. If the purchase was $278 or more, the late fees would be $68. research director Sally Tindall said:

“Before you sign up to a buy now pay later platform, read the terms and conditions carefully, because they all have different fee structures, often buried in hard-to-find places.”

“While Afterpay is free to use if you meet all the repayments, it’s still a form of debt that comes with its fair share of fine print,”

An ASIC report from last year found that 55 per cent of people spent more using buy now pay later services.

“One of the biggest problems with Afterpay is that it can encourage people to overspend, which can be particularly dangerous during the sales when there are major discounts to tempt shoppers.

“If you are planning to splurge at the shops using a credit card or a buy now pay later service, set yourself some rules before you leave home. The last thing you want to do is start 2020 in a mountain of debt,” she said.

How Afterpay works

Bussiness Man Money Bank Manager

Afterpay lets you buy an item in store or online and pay it back in four instalments over eight weeks, automatically deducted from your nominated transaction account or credit card.

There are no additional costs if you pay on time, however there are late payment fees if you can’t pay the money back.

Afterpay fees:

  • If you miss a repayment there is an initial fee of up to $10, followed by another fee of up to $7 if you still haven’t paid within a week. With four installments on every purchase, these fees can total $68.
  • Late fees are capped at 25 per cent of the purchase price or $68, whichever is less.
  • For orders below $40, a maximum $10 late fee is charged.

Tips to avoid overspending in the Boxing Day sales

  • Before you hit the shops, set yourself a strict spending limit – one that you can easily repay without sending you into financial tailspin in 2020.Money Parents Envelope Budjet
  • Don’t impulse buy – delay any large purchases for at least 24 hours. If you still think it’s worth buying the next day, then work out a way to pay for it.
  • If you decide to put something on Afterpay, make sure you will have enough money in your bank account when each repayment is due. It’s an automatic deduction and plenty of accounts will let you go into overdraft, potentially stinging you with even bigger fees.
  • If you work out you’ve blown the budget all too late, consider returning any unopened items. If don’t think you’ll be able to pay it back on time, call your credit card or buy now pay later provider to see what they can do to help.

About Afterpay in Australia

  • Average Afterpay purchase: $150
  • Average outstanding debt: $218 per customer.
  • Customers: Over 3 million in Australia and New Zealand, over 33,000 merchants.
  • Sales: $1.9 billion in the four months to October 31, 2019.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
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