Interest-free models such as Afterpay and zipPay are having an increasingly significant impact on the retail industry. Consumers have well and truly caught on, taking advantage of seamless financing and lines of credit that allow them to pay for their purchases incrementally and after the fact.
On the back of an e-commerce surge that has hit retailers hard in recent years, it seems like an inevitable move for the marketplace to tempt consumers with vaster, instantaneous access to all things ‘gratifying’. After all, we live in a time where you can have a cheeseburger meal delivered to you by Uber Eats – having instant credit at the checkout isn’t that much of a far cry.
In December, The Sydney Morning Herald reported 1500 Australian retail brands were “racking up $300million” in Afterpay sales, comprising a customer base of 250,000 which had grown from 40,000 in a ten month period.
But while the buy-before-you-pay market is thriving, our General Manager Jordan Morieson wants more people to be aware of the underlying ramifications of entering into some of these models, “an example of this is if you apply for a zipPay account, it essentially leaves an enquiry on your credit report. If you have applied for credit elsewhere, such as credit cards, and you end up with a substantial amount of enquiries over a period of time, it can start to cause issues with future borrowing.”
Morieson warns, “mortgage and personal lending institutions essentially expense the full facility credit limit even if the zipPay account holder has only used a small portion of it, which can affect your borrowing capacity.”
“We often work closely with our clients 12 months out from them applying for their mortgage. We sit down and go through their current circumstances, put a plan together, and strategize a way to achieve their financial goals. Essentially a dollar you spend today is a dollar you don’t have tomorrow.”
According to OECD Data, the ratio of Australian household debt to income more than doubled in the decade leading up to 2015. Astonishingly, Australia’s household debt in this respect now ranks the fourth highest in the world. And with household credit card debt being a long-held slippery slope for individuals and families, the rise of the buy-before-you-pay culture is alarming.
zipPay, which is essentially a credit line, promotes itself as, “a safe, simple and 100% interest-free account, offering you the ability to buy now and pay later, on your terms.”
According to the organisation Afterpay, their service caters to “financially healthy customers with responsible spending patterns”, allowing shoppers to have “flexibility and simplicity in how they pay for their purchases.”
A 31-year-old Melbourne-based shopper and Afterpay customer, speaks to that sentiment, explaining, “I think Afterpay is a great idea when used responsibly. It allows you to buy and receive the products with an achievable amount of time to pay back.”
She says she limits herself to one Afterpay purchase at a time while juggling existing credit card and personal loan debts. Asked if she has any regrets, she explains, “I have no purchase regrets, but I do regret the high amounts of repayments at times.”
“The advantage of Afterpay is you can buy products you may not ordinarily be able to afford. The downside is you can get easily addicted and end up overspending.”