The risks of Buy Now Pay Later services

Buy Now Pay Later (BNPL) services are becoming increasingly more popular. If you haven’t used one of these services before it essentially allows you to receive the goods or services today, and pay for it in later instalments. Here we look at how people are using this service and some key factors to be aware of to ensure it doesn’t negatively impact your financial situation.

Gone are the days of putting an item on layby and patiently waiting as you chip away at the repayments over time. Thanks to BNPL services, such as AfterPay, we no longer have to wait for the items, and even services, that we want. Offering convenience and helping manage cash-flow, BNPL services are understandably popular among Australians, with new competitors still entering the market to fulfill demand.

What are people buying?

Almost anything! The range of products available on BNPL is growing, from home essentials like groceries or appliances to luxuries like cosmetic dental work.

While BNPL services offer many benefits, it’s important to be conscious of the impact that delaying payments could have on your finances, such as appearing on your credit report, which can impact your ability to borrow money in the future.

The risks associated with Buy Now Pay Later

  1. Lack of regulation

Anyone is able to use BNPL services, whereas credit card providers have strict regulations as to who they can issue a credit card to. Since they don’t charge interest, BNPL organisations aren’t regulated in the same way as a credit card provider. Long-term this means that due to no regulations, it is easy to wind up in great debt ultimately affecting credit rankings.

  1. Over-commitment

The lack of immediate full payment means it is easy for people to make multiple purchases without considering the overall financial impact it may have on them. One in four Australians admits to regretting a BNPL purchase or hiding it from friends or family.

  1. Fees

When using a BNPL service, it is important to make timely repayments or risk being charged a relatively significant fee. For example, a $10 Afterpay late fee is equivalent to paying 6.67% interest on a debt of $150.

  1. Changing shopping habits

Using a BNPL service has been shown to affect how people spend. 55% of users admit to spending more than they usually would when they can use BNPL, and this is often on non-essential items. Overspending could affect long-term budgeting.

If you need further information on how to effectively use BNPL services, or help with managing your finances more broadly please reach out by calling our Oran Park office on (02) 9188 1547.


The material shown in this article is for general information purposes only. It is not intended to be, nor should it be read as specific personal investment or risk advice.

Before acting on any of the information contained in this article you should obtain special advice from a specialist investment or risk professional, which is appropriate to your specific investment or risk needs, objectives and financial situation.

Whilst all care is taken in the preparation of this material, no warranty is given with respect to the information provided, and accordingly no responsibility for errors or omissions, including responsibility to any person by reason of negligence is accepted by RP Wealth Management.

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Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.


Level 2, Suite 205
90 Podium Way
Oran Park NSW 2570

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