Buy Now Pay Later users ditching their credit cards
Buy Now Pay Later users are saying goodbye to their credit cards, with new research showing nearly 50% of Australian users have either cancelled or stopped using their credit card.
According to comparison site Mozo.com.au, who conducted the research, the results indicate a major shift in the way Australians are paying for goods.
"Buy Now Pay Later has changed the face of the way we pay for goods with more than 25% of users cancelling their credit card and a further 23% saying they no longer use it," explains Kirsty Lamont, Mozo director.
"The ease and convenience of opting for bite size scheduled payments has certainly taken Australia by storm, but the pitfall is that its incredibly easy to bite off more than you can chew, and miss a payment," she says.
"There does seem to be a disconnect between awareness of the negative effects to your finances and action taken to meet payments on time," Lamont says.
"Our research found that while three out of four users understood that missing a payment could affect their credit rating, one in three users had missed one or more payments, putting them at risk of damaging their credit score."
Worst offenders were males aged 18-24 years with nearly half missing one or more payments while 40% of females aged 25-34 had missed one or more payments. Awareness about credit ratings was up 10% from when users were asked in 2018, however users who maintained a perfect payment schedule actually decreased by 3%.
With 30% of Australian adults now having one or more Buy Now Pay Later accounts, there are approximately 5.8 million users across the country. Afterpay dominates the market share, with 84% of users holding an Afterpay account. Since arriving in Australia in 2015, Buy Now Pay Later has soared in popularity. Afterpay alone is now available at approximately 13,000 retailers across the country.
A sizeable 60% of users indicated that smaller digestible payments were influencing them to make purchases they wouldn't normally make, highlighting that Buy Now Pay Later options can make it very enticing to spend.
"Our research found that one in four users are hiding their Buy Now Pay Later purchases from loved ones, indicating that a number of users aren't proud of their spending habits," says Lamont.
"Males aged 25-34 were most likely to conceal their purchases with nearly 35% admitting they did so.
Those aged 25-34 have been the earliest of adopters of Buy Now Pay Later, having the highest share of accounts held for three years or more. Interestingly, 60% of users have held accounts for two years or less, indicating a huge surge in popularity. More than half of Buy Now Pay Later users had only one account while 28% held two, with women more likely to hold multiple accounts than men.
Purchasing via a Buy Now Pay Later app nearly doubled, up from 14% to 27% of all purchases, meaning that many users are now actively browsing the sites searching for potential items or services to spend on, rather than making a decision in a retail store or website.
Buy Now Pay Later users appear to be making a high number of purchases through the payment platform, rather than making the odd purchase here or there. Twenty five percent of users have 3-5 payments on the go at any time, which can be a lot to keep track of.
"To stay on top of payments it's important you have a solid idea of your incomings and outgoing in your account and understand when your scheduled payments are," Lamont says.
"You will be paying for an item months after you've walked out of the store or click buy now, so its crucial to consider the possibility of poor credit ratings and additional costs through late payment fees if you don't think you can meet your payments on time," she explains.