Big financial institutions offering customers buy now pay later options
Financial institutions are ‘serious’ about taking on and ‘tackling’ the buy now pay later schemes by offering set payment plans on credit cards.
Money
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Banks are attempting to take on the buy now pay later juggernaut in a bid to attract customers who are ditching credit cards in droves.
The schemes are booming in Australia with millions of users, forcing traditional card providers to offer more choice and competitive deals to ensure they keep customers or attract new ones.
Card interest rates remain stubbornly high at often more than 20 per cent but now many lenders are offering deals under 10 per cent.
Larger financial institutions including the Commonwealth Bank, Westpac, Citi and ING are among those offering buy now pay later options to credit card customers.
Under the schemes lenders allow customers in many instances to make larger purchases and select a payment plan to repaying the debt.
For instance CBA’s SurePay, which rolled out more than 12 months ago, enables customers to repay all or part of their credit card balance by making fixed payments over a set term.
Some of these offers also come with discounted interest rates.
Financial comparison website RateCity’s spokeswoman Sally Tindall said financial institutions are serious about tackling these schemes head on.
“They were initially slow to react to the buy now pay later movement but now they’re taking the challenge seriously,” she said.
“A number of providers offer credit card instalment plans to let you pay off big purchases in chunks at a reduced rate.”
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The latest Reserve Bank of Australia data shows Australians owe $43.1 billion on personal credit cards and $27.2 billion is accruing interest – the lowest level of debt accruing interest since December 2006.
Banks are also using bonuses such as cash back, frequent flyer points, rewards and fee waivers to lure customers.
Under the BNPL schemes including Afterpay and Zip Pay customers do not pay any interest charges on their purchases if they cannot pay the items off in full.
But users are hit with fees and face been blocked for failing to meet the strict repayment criteria.
Afterpay customers must repay items over four fortnightly repayments.
The Commonwealth Bank’s general manager of credit card products Caleb Reeves said their equivalent of a buy now, pay later option gave “credit card customers more choice and flexibility to manage their balances and large purchases”.
“They can repay all or part of their credit card balance by making fixed payments over a set term,” he said.
Under SurePay there are three types of plans available for purchases of more than $600, allowing purchases to be paid off over a planned payment program.
This is different to just putting items on a credit card and paying it off at the customer’s leisure.
Rival bank Westpac’s SmartPlan option was rolled out in 2017 and allows customers to pay off items in a 3, 6 or 12 month instalments.