Debt, Money Management

Buy Now, Pay Later Customers Drowning in Debt

 April 4, 2020

By  Chase Edwards

A senate inquiry has revealed shocking stories about the debt young Australians incur through buy now, pay later companies like Afterpay and Zip Money. These providers market themselves as a financially-savvy alternative to credit card companies, as users can pay their purchases off over time with interest-free instalments. However, they’ve been accused of targeting vulnerable Aussies without the means of repaying their debts.

One of those Australians is Renny O’Dwyer, a 19-year-old university student making just $300 a week from Centrelink payments and her part-time job. Despite earning less than a fifth of the average Australian weekly wage, Afterpay allowed her to rack up debts of $3110.

“When I shop, it’s quite an addictive thing — you get adrenaline when you purchase things,” she told the ABC’s PM program. “I would more often than not just keep using it, and for things that I wouldn’t necessarily buy.”

Ms O’Dwyer says half of her weekly earnings are now consumed by Afterpay repayments. She believes the financial provider and other companies like it are dangerous for anyone who isn’t financially literate.

“You know, you’re just out of high school, you’re a uni student, you don’t have a full-time job — you’ve never had that kind of experience where there’s expenses to life,” she told the ABC.

Her assertions are supported by a recent Australian Securities and Investment Commission report, which found one in six customers who use Afterpay are in financial trouble. More than half of these people are aged between 18 and 32.

Despite the findings, Afterpay co-founder and chief executive Nick Molnar insists his company is financially responsible.

“Afterpay is not in the business of offering a $20,000, or even a $5000 loan,” he told the hearing. “We’re not a line of credit, payments are attached to a discrete product or service, which means we can never be used for a gambling-type service.”

He added that Afterpay users cannot continue accumulating more debt through the service if their payments are outstanding. He also noted the average Afterpay user owes just $208, far less than the average credit card debt of $4200.

However, while people typically have smaller debts using Afterpay and other buy now, pay later services, that doesn’t diminish the stress some users feel repaying their purchases. If you’re a stressed out Afterpay customer or simply feel your debt and spending is out of control, call Chase Edwards on 1300 854 833. We can help you pay down your debt and regain control of your finances much faster than you might think. Discover a smarter, less stressful way of managing your money today.

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