Buy now, pay later users cut spending amid cost of living woes, RateCity.com.au says

Amid stubborn inflation and high interest rates, more than one fifth of Australian buy now, pay later users have had to cut back on, or go without, essentials such as food.

More than one-fifth of Australian buy now, pay later users have had to cut back on, or go without, essentials such as food in order to pay off their debts, with 20 per cent overstretching their budget amid the cost of living crisis.

A new survey of more than 1000 respondents from RateCity.com.au found while the majority of BNPL users did not suffer any financial stress while using the alternative payment method, it should still be treated with caution and careful financial planning.

The survey found 50 per cent of BNPL users have just the one account, while 21 per cent used three or more. There was even one respondent who claimed to have eight different BNPL accounts.

More than 20 per cent of BNPL customers have cut back on or gone without essentials such as food. Picture: John Gass

Over a 12-month period, 20 per cent of respondents say they overstretched their budget, 16 per cent copped a late payment fee, and 13 per cent went into overdraft on their bank account — due to BNPL payments generally being done via automatic debit.

Just over half of the respondents claimed to not have had any sort of financial stress, but of those who did, 22 per cent had to cut back on (or go without) essentials such as food, 20 per cent were late on other bills, 15 per cent borrowed money from family or friends, nine per cent had to find more work and nine per cent got a credit card or a personal loan to help cover costs.

“If you have to pay for your purchases on a credit card, or a BNPL platform, your savvy shopping plans could backfire within weeks if you can’t clear the debt in time,” said RateCity research director Sally Tindall.

“While most BNPL platforms don’t charge interest, they still have the capacity to blow your 2024 budget into pieces. If you’ve decided to use BNPL to grab a bargain, stick to one platform at a time, and ideally one purchase,” she said.

“It’s also worth heading into the sales with (a) keen sense of scepticism. Before you buy anything, double check you can’t find the same item cheaper elsewhere.

“The Boxing Day sales is an Australian tradition for many families, but if you’re heading to the shops flat broke, think about turning around and hitting the beach instead this year,” she said.

Earlier in the year, the Albanese government announced new regulations to treat BNPL services as credit products, suggesting providers should apply basic checks to ensure customers won’t fall too far in debt.

At the time Financial Services minister and Assistant Treasurer Stephen Jones said: “This is not home loans we are talking about here, it’s generally speaking small amounts … So credit checks and other obligations that are put in place should be commensurate with the risks involved.”

Originally published as Buy now, pay later users cut spending amid cost of living woes, RateCity.com.au says