Aussies have increasingly turned to buy now, pay later (BNPL) as the cost-of-living crisis worsens, but now it's causing problems for many consumers who are racking up debts across multiple providers and exacerbating their financial stress.
As the lovechild of instant gratification and modern consumerism, BNPL’s ‘get it now, worry about payment later’ concept keeps us stuck in a cycle of consumption that is difficult to get out of.
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Here are four psychological traps of BNPL that keep us stuck in the spending cycle, and tips for how to break free right now.
Trap 1: Leaving it to ‘future you’
When you purchase an item with BNPL, you’re only required to pay a small upfront cost and in some cases you don’t need to pay anything at all. Either way, the rest is for future you to worry about.
Psychologically, this reduces the barriers to purchase and streamlines our spending. Our brains have a habit of viewing our future selves as strangers, making it a lot easier to pass the buck onto the person we believe we’ll be in two, four or six weeks time.
Problems arise when the excitement of that initial purchase has worn off long before we’ve paid the bill. And in the case of consumables like makeup, skincare or even food and drink, it’s possible that we’ll have finished the items before they’re even paid off.
Trap 2: The cycle of BNPL consumption
Getting lumped with four bills (or more) to pay off for every transaction made with a BNPL provider can cause continual dents in our relationship with money. You buy something once, but you have to experience the pain of paying for that item for weeks afterwards. This can cause a feeling of shame, regret or perceived loss of control of our finances – and these are all emotions that can lead to more spending. Not only that but the relief of finalising payments can be enough to send you on a reward-hunting shopping spree.
Trap 3: We spend more with BNPL
BNPL providers boast increased sales and higher average order values when onboarding merchants, which proves one thing – we spend more when we use BNPL.
Why? Because over time our brains become accustomed to splitting prices into several instalments. Suddenly, something that costs $100 is getting through our affordability filter as though it’s a $25 expense. Plus, being able to defer responsibility without compromising on instant gratification makes it easier to commit to bigger purchases.
Trap 4: Rewards and incentives jack up the dopamine
It’s no secret that spending money gives us a dopamine surge. But some BNPL providers take further advantage of the addictive nature of spending by offering rewards, discounts and offers. This is another consumption cycle trap as our brains seek out more rewards and excitement through the use of BNPL.
How to break up with BNPL
If you feel stressed about your use of BNPL and want to cut back, here are five tips to help break the habit:
1. Freeze your accounts
Check with your provider(s) if you can freeze your accounts to block new transactions and focus on paying off your balances. Giving yourself a bit of distance can help you make faster progress. This will feel hard at first but you’ll start to see the difference quickly.
2. Reduce your spending limit
Different providers offer different credit limits, and some vary depending on your behaviour. Speak to your provider to reduce your credit limit and limit the temptation to spend money.
3. Work out exactly what you owe
If you have multiple BNPL accounts, total up what you owe across each of them, and divide this total by six, 12, 24 or 36 weeks to work out how much and how often you’d need to pay to clear your balance. Choose the one that best suits your financial capacity, and get started,
4. Reduce your exposure to shopping
One of the biggest traps of paying off your BNPL debts is temptation to buy more along the way. Reduce your exposure to shopping by unsubscribing from promotional emails, use a site blocker to restrict your most-used online shopping sites, and avoid browsing stores when you’re bored.
5. Speak to a financial counsellor
If your BNPL debt is eclipsing your financial capacity, financial counsellors are free to access in Australia, and can help you manage mounting debts and negotiate payment terms.
Contact the National Debt Helpline for free on 1800 007 007 to be connected with a financial counselling service in your state. The Mob Strong Debt Helpline is also available for Aboriginal and Torres Strait Islander peoples, on 1800 808 488.