Why you should avoid buy now, pay later this Christmas
There are ways of saving and spending responsibly this festive season without putting your credit rating at risk.
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As the silly season fast approaches, whether you’re earning the big bucks or struggling to buy essentials, it’s likely you’re feeling pressured when it comes to purchasing Christmas gifts.
As the cost of living crisis continues, many people are left wondering how they’re going to afford to live through the annual gift-giving process.
It’s little wonder people are flocking towards the seemingly stress-free buy now, pay later services.
At first glance they appear to strike the perfect balance between meeting the present expectations of your loved ones while still being able to afford petrol and food for the week between Christmas and New Year’s.
According to a survey conducted by Afterpay, one of the most recognised buy-now-pay-in-instalments services, one in four people are planning to spend more money on Christmas gifts this year than they did in 2021, with the average amount between $50-150.
Over half of those surveyed said they’d be more likely to buy something if it was on sale, and two in five people will take advantage of Black Friday and Cyber Monday sales.
Afterpay Country manager Katrina Konstas said the holiday season doesn’t need to be stressful, as people who use Afterpay can budget their purchases and pay in four instalments.
“This will allow Aussies to show how much they care for their loved ones, while still sticking to a budget and managing the financial pressure of the holidays,” Ms Konstas said.
Afterpay, along with other similar instalment purchase methods such as Zip Pay, Humm, Klarna, Latitude Pay and others, draws customers in with interest-free periods, scheduled repayments and accessibility.
But what if you’re not someone who’s in the best position to budget those repayments properly? What impact will it have on your credit score?
Finance expert and founder of It’s Simple Finance, Joseph Daoud, told NCA NewsWire it’s extremely hard to change the mindset of people when it comes to gift shopping.
Mr Daoud said money lenders will always look at Afterpay and specifically ZipPay as detractors when going for a loan, as they are both considered overspending outside your means.
“While it doesn‘t affect the credit score, governments have been thinking about law changes to have this as a form of credit,” Mr Daoud said.
“Afterpay is genuine buy now, pay later with fees included. It‘s not a form of credit, but lenders will look at your spending for the last three months on this account and it will affect any borrowing.
“ZipPay is a line of credit, which is a facility opened up against your income.
“This will affect your credit score, and your borrowing capacity as even though you don’t use it, it will effectively be seen as an outstanding debt.”
“This is all about people living within their means when it comes to Christmas shopping and not overspending,” Mr Daoud said.
When it comes to gift giving and healthy spending, Mr Daoud says now is not the time to be spending on yourself.
“Stop spending on yourself for the next four weeks, as you can’t be focusing on yourself and your selflessness at the same time.”
“Pick up extra shifts and work overtime if you are planning to splurge on friends and family.”
Mr Daoud said lots of outlets would be holding 30-50 per cent off sales online from now until the end of November, so it’s a great time to take advantage of sales to get cheaper Christmas gifts.
“For example, The Iconic and Culture Kings are both having 50-70 per cent off at the moment.”
He also suggested looking through second hand stores and on eBay, as well as Facebook Marketplace for a bargain.
Originally published as Why you should avoid buy now, pay later this Christmas
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