Buy Now, Pay Later (BNPL) is a way to buy a product or a service using interest-free instalments over a short period of time. It is like using a credit card, except that no card is involved and credit checks aren't required. Unlike credit cards, most BNPLs do not charge interest; however, late fees are charged if an instalment payment is late. If you’re struggling with expenses because of your partner’s financial behaviour, BNPL can look like an attractive option, but it is not without its pitfalls.
When using BNPL, you are using money you do not have, essentially getting into debt. If you are already struggling financially, BNPL could worsen the situation. Additionally, signing up for more than one service can become difficult to track.
There are several BNPL providers, and each is different, so be sure to read the fine print before committing to one; for instance, some charge monthly account-keeping fees, which are fixed monthly fees of up to $10. You may also come across establishment fees and payment processing fees.
The most common fee you’ll be charged is a late fee if you miss the due date. Late payments can add up and affect your credit rating, impacting your ability to borrow money in the future.
Using BNPL can be a strategy to manage your finances, especially for emergencies as you can spread the total cost into equal instalments over time. However, it is the BNPL provider that sets the period of the payment plan.
While BNPL can help you manage expenses or set yourself up after leaving an abusive partner, it is also a product that perpetrators can misuse by illegally taking out an account in your name.
It is financial abuse if someone:
- Creates an account in your name without your knowledge
- Forces you to open a BNPL in your name
- Makes you pay for something you didn't buy.
BNPL is still relatively new in Australia, so providers don’t face the same rules as they do when providing credit cards that require them to assist people experiencing financial hardship (eg. through domestic and family violence).
One alternative to BNPL is the No Interest Loan Scheme (NILS), in which you can select the payback period removing the pressure that a BNLP may cause.
If you find yourself in financial difficulty because of BNPL, you can reach out to a financial counsellor who can advocate on your behalf.