But I Want It Now – The Dangers of Afterpay
We have all had those days when we go shopping and stumble across something we didn’t know we needed, and of course its just before payday and your account is bare! But it’s all good because your favourite retailer has Afterpay and that’s just like lay-buy isn’t it? Well yes and no…
Whilst your typical lay-buy is paid over 6-8 weeks in full with a small establishment fee you don’t get the rush of being able to take that item away with you immediately. Afterpay changes this and gives your dopamine levels the instant rush of being able to have your item without waiting and deal with payment later… Seems like a great idea, right? Well, no. Let’s dig a little deeper…
Immediate gratification is what is marketed to us today from savvy retailers wanting to increase their sales and grow their businesses. In essence they want us to “have it now” and we can, thanks to Afterpay. Those of you who run a tight budget for your household and account for every dollar in spending would soon realise that there may be no more additional funds available for excess purchases. In these arrangements Afterpay might seem like a good idea, but in essence you are signing up to further debt and putting strain on your household budgets by not having any further funds available in which to pay for your new item/s.
Afterpay charge you over “4 simple automated payments” every 2 weeks. Did you know that if you miss a payment you get charged a $10.00 fee and if you fail to make a repayment within a week they charge you another $7.00 fee on top of this*? I’ll give you another example. If you miss the repayments on a $100 pair of jeans it will potentially cost you another $68*! What is even more scary is that they don’t perform a credit check before you sign up so there is no check in place to ascertain your capacity to repay. Furthermore, if you do miss all of your repayments Afterpay has the right sell the debt on to “third party collection agencies,” which can then affect your credit rating. OH MY GOD!!! I just purchased a pair of jeans and now I am getting threatening letters and phone calls from a debt collection agency! Think of it this way… is it worth having a mark on your credit file for a pair of jeans you cannot afford to pay for? We would say no.
Wow… but I thought Afterpay was a good thing?
Well it is, if you have the funds in your budget to make payment on the items you wish to purchase. Afterpay is brilliant for the retailer as they make the sale and brilliant for the consumer as they get their product immediately. It’s like a nice warm handshake at point of sale where both parties win and the deal is done.
The flow on effect of missing payments can make Afterpay a danger for some. If you are looking at getting a car loan, credit card or even a mortgage, your lender will check your credit file to evaluate your risk of lending and will look to see if you have a clear credit history.
So is Layby good – yes, it is. Is Afterpay good – yes, it is. As a consumer you must be aware of the tactics at play in our retailers and the way in which they sell, and in some instances even look at the psychology of selling. Afterpay is great if you have the extra funds and Layby is great if you can wait for your item and prefer to pay off rather than have debt. Both can work for you, but that’s the key. They must WORK for you, not the other way around where they put you into debt.
We all need to make an informed choice when it comes to our purchases.
*information from www.choice.com.au – What is afterpay and can it be trusted.
At Adelaide Budgeting we are a small and passionate team dedicated to making budgeting simple, easy and fun. We pride ourselves on the ability to remove anxiety and create empowerment around budgeting for each and every single one of our clients without the extreme costs of other “leading” service providers.
Find out how we can help you today – 0420 846 454. What have you got to lose?