Afterpay and zipPay scheme warnings for Christmas shoppers

CHRISTMAS shoppers racking up debt on buy now, pay later schemes are being warned they could face serious financial woes in the new year.

EXCLUSIVE

CHRISTMAS shoppers racking up debt on buy now, pay later schemes should be careful because it could impact their ability to get credit.

Big bank Westpac has issued a notice to mortgage brokers warning them to consider these popular payment schemes often used at Christmas, including Afterpay and zipPay, as a liability when assessing a person’s financial affairs.

Afterpay has more than 1.3 million Australian customers and is expected to have annual sales of more than $1.7 billion.

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Financial comparison website RateCity’s spokeswoman Sally Tindall described these schemes as a “runaway freight train that’s creating a market of people buying things they can’t afford.”

RateCity spokeswoman Sally Tindall warns of the dangers of AfterPay.

“It’s easy credit for people who might not otherwise get a credit card and if you rack up a significant amount on these payments schemes it will have long-term repercussions if you can’t pay down the debt,’’ she said.

“The good thing is there are limits on AfterPay up to $1500 per transaction so there are sensible perimeters to help people pay it back, but if they put these payments on a credit card they can be hit by nasty interest rates.”

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These schemes provide 100 per cent interest-free lines of credit and allow customers to order online or walk out of a store with the items in hand and pay for them at a later date.

Customers are given a time frame to pay off the items and they incur charges if the money owing is not paid off in full by the due date.

But AfterPay chief executive officer Nick Molner said a “vast majority of customers meet all their payments and pay off their purchases without incurring any fees.”

Afterpay founder Nick Molnar said most customers link the payments to their debit cards not credit.

He said 85 per cent of Afterpay payments are made using a debit card, not credit.

But escalating debts remains a problem — in debt collection agency Fox Symes’s 2017 Customer Debt Report which compiled Galaxy research from 200 people whose debts landed with the firm, it found when customers did finally pay off their debts 48 per cent pledged never to have a credit card again.

The firm’s spokesman Deborah Southon warned racking up debt on these payment schemes could lead to serious financial woes in 2018.

“It’s so tempting especially when the sales come and people buy something they don’t really need and they put it on credit,’’ she said.

“What people really forget when they are using credit is they are spending money they don’t have.”

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Afterpay costs

— Four equal instalments due every two weeks.

— If a payment is not made a $10 fee applies.

— Another $7 fee applies if the payments are unpaid seven days after the due date for an outstanding instalment.

zipPay costs

— No interest charges on your outstanding balance.

— Minimum $40 monthly repayment required if there is a balance owing.

— Customers can set the frequency of their repayments from weekly, fortnightly or monthly.

- $5 late fee applies if the customer has not made the minimum monthly payment for more than 30 days past due date.