BNPL users get access to goods or services now, but pay for them later in interest-free instalments. Photo / 123rf
More families crippled by the rising cost of living are turning to buy now, pay later arrangements for meat and groceries, while a solo mum says her children would miss out if she did not use it for essentials.
Another mother paying $200 a fortnight told NZME she felt it encouraged bad spending habits, and a budget adviser said one client racked up $3300 of debt at one time.
Consumer NZ said it was concerned about people using credit cards to meet payments, while the latest quarterly data from the Retirement Commission showed use of buy now, pay later (BNPL) products was up from 21 per cent to 26 per cent — the highest since it started recording at the beginning of 2021.
However,major player Afterpay said it contributed $1.3 billion in GDP to the NZ economy in 2022, it was safer than other forms of credit as its late fees were capped at $68 or 25 per cent of the original order value.
Consumers who use BNPL products can get access to goods or services now, but pay for them later in a series of interest-free instalments.
Solo mum Alicia Attwood said her children would miss out on sports and school camps without Afterpay. The beneficiary said she had to choose “what to pay and what I can’t pay” when it came to bills such as power and groceries.
“My kids would miss out on a lot if I didn’t have Afterpay, I’m able to clothe them, put shoes on their feet … it’s a huge asset for me. I always buy everything when it’s on special so I never pay the full price. I use Google to shop around for the cheapest and best deals and I use Afterpay to do my meat hauls.
“I easily do two $400 meat hauls every four months or so … I stick to mainly bulk mince, brisket and chicken.”
Ruth Cameron said she had up to $200 a fortnight going out towards Afterpay for makeup, skincare, shoes, and clothing for herself and her children. She stopped using it earlier this year because she could not stick to her personal limits.
“I felt like [BNPL] encourages me to spend more than I am actually earning and encourages my own bad spending habits of not being able to wait for things and always finding a reason to make a purchase. I am too undisciplined and the payments all add up quickly.”
Tania Evans said bulk-buying meat could be cheaper and paying a large amount in instalments made it easier for those on a tight budget.
A BNPL user, who asked not to be named, said she had bought everything from a laptop to items that only added up to $10.
“I’ll be really honest, I wish I never knew about them because I’ve spent way more money than I can actually afford.”
Donna Wilson used Afterpay and loved the convenience and said it had been great for gifts, food and household items.
“It does need to be paid back so you still need to budget and not spend beyond your means. I can see how it would be easy to get in over your head.
”If you have a high limit you could easily go crazy with your spending… If you have control, it’s awesome.”
Angee Maangi said she used to have three BNPL accounts but recently closed them.
“I spent a lot more than I actually needed to on materialistic things.”
She had used BNPL for the hairdresser, clothing and health supplements.
“Now I’m able to thoroughly think before making purchases if I really need the item. [BNPL] makes shopping so super convenient but it also entices reckless spending.”
Jhays Car Grooming & Detailing Rotorua owner/director Jose Jeremy Seastres said he had used BNPL as a payment option for clients and that used to cost him 3 per cent of the total price of his services.
“I’m still using it to purchase products for my business as it helps a lot with cash flow.”
Rachel Briscoe said she loved BNPL.
“But I’m very responsible with money. Nightmare if you weren’t.”
Courtney, who did not want her surname published, said she was stuck and had been using a BNPL app for more than three years and her limit was up to $3000.
“I’ve never been late for a payment and I’m also a poor student and I have no idea how I’ve managed to keep up with my payments.”
Bay Financial Mentors manager Shirley McCombe said it had seen people with 15 BNPL purchases at once.
“Many of our clients who live in crisis, day after day, tend to be focused on solving the most immediate problem, not thinking about the long-term impact of their decisions.”
She said some struggling families thought BNPL was “the only way they can see to buy groceries”.
“Of course, all it does is move the problem to the next week where it is now compounded. Addressing the issue is multifaceted, there is a need for greater regulation around establishing a person’s ability to repay without causing hardship, but that is only part of the problem. The other is the current cost of living, and the financial pressures people are experiencing.”
Rotorua Budget Advisory Service manager Pakanui Tuhura said if people met their repayment deadlines there was no issue, but some who missed payments were stuck in a catch-up cycle.
“Even when they meet their deadlines there is pressure elsewhere in their household budget as money is diverted from other more important things (rent, food, power) or worse, interest-bearing debt is used to meet the deadline.”
This year one client had six BNPLs running after spending $3300 on items ranging from food to IT equipment.
“This creates stress for most people as they lose control of their money and now concentrate on debt repayment.”
Consumer NZ head of research and advocacy Gemma Rasmussen said in its view, the increasing availability of BNPL made it more tempting for people to spend money they may not have.
It was most concerned about vulnerable consumers “more likely to be using BNPL to cover essential day-to-day items”.
Its April 2023 survey data shows just over a quarter of New Zealanders have a BNPL account — a figure that had stayed consistent for the past year and a half.
However, 35 per cent of people with a BNPL account pay for their services with a credit card, leaving them vulnerable to a second cycle of debt, she said.
Retirement Commission personal finance lead Tom Hartmann agreed and said people who used credit cards to pay BNPL instalments could spiral into more debt.
“In the short term, it feels doable but it can become much more expensive. You get into trouble very slowly and then you are in over your head.”
He questioned whether there were enough guardrails in place and if people should be allowed to have only one BNPL at a time.
Hartmann said the danger of buying groceries and meat was those items could run out much sooner than expected.
“Then you can end up starting buying more before you’ve even finished paying for the deal before, so it can snowball up on you.”
Hartmann acknowledged BNPL could be helpful if used correctly but there were pitfalls, and he urged people to seek help if they were in over their heads.
An Afterpay spokesperson said millions of users worldwide were moving away from high-interest-bearing credit products in favour of safer alternatives like Afterpay.
“Kiwis want to have access to safe personal finance products that allow for some helpful flexibility in the household budget — whether that’s to replace an unexpected broken washing machine, or treat your family to a fancy meal to celebrate a graduation. Kiwis have been using credit cards for these purposes for decades.”
In its view, calls to limit BNPL availability advocated limiting consumer choice, and that could push millions of users back to credit cards, Afterpay said in a written statement.
It said the larger question that should be asked was: “What is the safest form of personal finance?”
It recently published a report in partnership with BIS Oxford Economics that found that in the 2022 financial year, Afterpay contributed $1.3 billion in GDP to the NZ economy and created or supported 9500 jobs.
Globally, the average purchase was about $150 and the average outstanding balance was $200.
Zip was approached for comment.
Centrix data shows in the year to June, BNPL grew 2.2 per cent, while people in arrears in June increased to 10.4 per cent — just short of the record high reported in March.
A Ministry for Business Innovation and Employment spokesperson said it was aware of four BNPL providers operating in New Zealand.
In October, the Government agreed to apply the Credit Contracts and Consumer Finance Act 2003 to BNPL so borrowers would receive most of the same protections as with other credit contracts like credit cards and personal loans.
It planned to soon publish 32 public submissions received on BPNL providers being required to do comprehensive credit checks on borrowers, with a proposed threshold of $600.
A spokesperson for Commerce and Consumer Affairs Minister Duncan Webb told the NZ Herald “alternative options” were being considered to regulate the sector — in addition to those proposed in draft regulations — after submitters’ feedback.
The final regulations would be made this year.
Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.
The couple spend five months a year in America running their business.