Zip Pay, Tap and Go, “Convenience For The Consumer”
These days consumers have it so easy. When it comes to paying for groceries, paying for a meal out its so simple to just pull out your card, or open an app on your phone and tap and go. The process is so simple and makes the transaction simple and user friendly to the consumer. It has to be the best thing ever though right? Well…
There are many ways for consumers to purchase products now and have that item immediately without having to even think twice about making repayments. In fact, most people would just think….. ‘I’ll just make the payments when they come, I can afford it, so the risks associated with using these services such as late payment penalties, marks on your credit report simply “won’t happen to me.” We find that most people don’t enter into an agreement of any sort thinking they are going to fail, and most people think solutions such as Afterpay and tap and go are just easy and convenient alternatives to cash. This is not the case at all!
The difference between Zip Pay and Afterpay? In a previous blog (see “the dangers of Afterpay“) we discuss that Afterpay doesn’t go on your credit report unless you miss a payment. Zip Pay on the other hand goes on your credit report immediately after you sign up and places a “hit” on your credit report. Why should you care? Well normally clients using these services see it as easy and almost like a lay-by, but when it comes to purchasing a home, lenders will view it as a liability regardless of it only being over 4 payments! This can significantly impact your ability to borrow your desired amount as Zip Pay information is requested by lenders in order to calculate serviceability (your risk factor), suitability and ultimately you may miss out on the house you wish to purchase for yourself and your family to live in. In short terms it can be detrimental to your home buying future!
What has shocked us most recently and what we have witnessed first-hand is a huge change on how consumers are choosing to pay for their goods. Over the weekend we visited our local pub for a cheeky pint and a shared meal between us whilst the Port Adelaide Power and Collingwood played at the venue on the big screen. The amount of people coming up for drinks time and time again with their phone, or their cards to make payment for one drink was phenomenal! Sure, you can track your spending with apps etc, however, every single time you tap your card you are adding another footnote to your digital footprint! What shocked us most was that there were some people going up 4,5, or 6 times – even more and tapping their card or phone each time for payment! If you are purchasing a home or looking to do anything financial, and you spend in this way then there is real risk for you as the lender will request your statements to ascertain your ability to manage and repay your loan. How do you think a lender would view your level of risk if they can see how much you are spending on indiscretionary items? You could be rated a very high risk and hence, lenders would not view you favourably for future lending which can significantly reduce your borrowing capacity or even see lenders not wanting to loan to you.
Another point to for you to consider is about all of the different options consumers now have at point of sale in retail. The role of a retail sales assistant is to make the sale. Zip Pay/Afterpay make it easy for the consumer and for the sales person to hit their targets. The role of a salesperson in retail is to sell and they are trained in order to do so. They are not interested in how you pay, or how you fund your purchases they just want to make the sale. Sounds cold but it’s true! The typical retail sales person does not know your financial position as to whether you can afford an item or not, nor are they trained in finance and we feel shouldn’t be offering these services as they are not trained in order to do so. Your purchase becomes another part of your digital footprint.
So, after the doom and gloom of your digital footprint, credit score checking, convenience for the consumer do you ever get the feeling you are just being watched? How much are we paying for this “convenience?” Is it worth the detrimental risk of your financial future? We think not. So, how do you fix your digital footprint? The answer is simple, you simply won’t believe it!
The answer is CASH, pure and simple! Give yourself a weekly allowance to spend on the cheeky things we all enjoy that do not show up on our digital footprint. Be smarter than the institutions that seek to record each and every single purchase we do. Convenience will ALWAYS come at a cost.
At Adelaide Budgeting we develop cash and savings strategies to help you Budget, Save and Succeed. Contact us today to see how we can help you!
Christine Albon is a Credit Representative ( Credit Representative Number 377138) of BLSSA Pty Ltd ( Australian Credit Licence Number 391237)