Buy now, pay later boom ignored by older Australians as debts rise

Afterpay, Zip Pay and other buy now, pay later services are growing fast, but one group of consumers is ignoring the action.

Seniors have shunned the buy now, pay later boom that has seen this new breed of consumer debt spread to almost one-fifth of Australians.

Rapid growth in BNPL services such as Afterpay and Zip Pay has turned the sector into the nation’s fourth most common type of debt, despite not existing seven years ago, according to a new report by NAB Behavioural and Industry Economics.

But BNPL’s rising popularity has sparked a jump in people struggling to pay debts, financial counsellors warn.

NAB’s report says almost four out of ten consumers with BNPL loans have missed a payment, and many hold multiple accounts.

NAB’s Rachel Slade says where you shop will affect how you pay for it.

It’s much more widespread among younger consumers, NAB says. Just 5 per cent of over-65s have buy now, pay later debt, along with 13 per cent of those aged 50 to 64 – compared with one quarter of people aged under 50.

NAB group executive personal banking Rachel Slade said older consumers were more entrenched with traditional ways to pay.

“Most would have a credit card in their wallet – that’s a way to pay that works for them,” she said.

“Where you shop definitely drives how you pay.” BNPL’s popularity in online shopping and among people buying clothing, big household items and children’s goods also make it popular with younger generations.

NAB’s survey of 2000 consumers found 31 per cent held two BNPL accounts and 12 per cent held three accounts, while 37 per cent had previously missed a payment – which attracts late fees.

Ms Slade said the rate of missed payments was higher than for credit cards and this was an area to watch, “particularly for that lower-income group that tends to have more accounts”.

Financial Counselling Australia CEO Fiona Guthrie said credit cards remained the biggest cause of debt problems “but BNPL is growing really fast”.

“The problem is that it is too easy to get in over your head,” she said.

“Financial counsellors see people who can’t pay their essential living expenses, like food or rent, because of BNPL debts. That wasn’t something we saw a few years ago.”

BNPL services do not charge interest, but their late fees can range from $3 to $30 and Afterpay – the sector leader with a 66 per cent app market share – charges a $10 late fee plus $7 if still unpaid after seven days.

“Financial counsellors also see people who are using their credit cards to pay their BNPL debts,” Ms Guthrie said.

“That means that they may end up paying interest after all.

“Financial counsellors are reporting more and more clients have multiple accounts or multiple BNPL payments with the same provider. Late fees can quickly add up and on the relatively small original debts are quite high.”

A BNPL financial counselling workshop heard of a client with two children and 20 separate BNPL accounts being unable to afford food or rent.

NAB’s report says BNPL is now Australia’s fourth most common type of debt held after credit cards, home loans and personal loans - ranking ahead of investment loans and payday loans.

Originally published as Buy now, pay later boom ignored by older Australians as debts rise