The rise of short-term instalment payment options such as Afterpay and Oxipay could be a slippery slope into debt for people unable to meet the repayment schedules, says CFFC’s head of Community Programmes, Peter Cordtz.
“On the face of it these systems seem like an easy way of spreading your payments because you’re not getting stuck with fees and interest, but there’s still risk,” says Cordtz. “You’re still borrowing, and you’ll catch penalties if you run past the agreed timeline for repayment.”
Afterpay works like layby, except you get the goods up front. Repayment schedules are usually between three and eight weeks, but hefty penalties kick in if you miss a payment. The ease of buying goods this way online and in-store means some people purchase multiple goods with overlapping repayment schedules, which they might find a struggle to meet.
CFFC’s Financial Capability Barometer Survey shows that nearly 27% of New Zealanders don’t pay off their credit cards at the end of each month, and 39% have missed a financial due date in the previous year.
Cordtz says Afterpay-type schemes present an added risk of debt for these people.
“We work across quite a few community partnerships, and we find high levels of consumer debt, even where household income isn’t an issue. There are credit cards, car loans, hire-purchase agreements ... Afterpay and the like make it still easier to consume, and there’s risk in that ease of consumption.”