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Devastating reality of buy now, pay later schemes: ‘Growing problem’

The average buy now, pay later debt is $2,200.

Afterpay and Zip sign. Buy now pay later. Australians shopping.
Aussies are using buy now, pay later schemes to pay for their food and groceries. (Source: Reuters/Getty)

Aussies are increasingly using buy now, pay later (BNPL) schemes like Afterpay and Zip Pay to buy essentials like food and groceries.

A new report by Anglicare Tasmania found there had been a sharp increase in the number of people with BNPL debts seeking help from financial counsellors in the past 12 months.

Based on a survey of its financial counsellors, Anglicare found many clients were prioritising paying their BNPL repayments over other essential expenses, like food and rent, while also using the services to pay for their essentials.

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“This is a growing problem. Buy now, pay later debts are more common than a year ago and many people are struggling to repay them,” Anglicare Social Action and Research Centre researcher Dr Alexandra King said.

“BNPL debts add another layer of complexity and difficulty to an already-complex picture of indebtedness. The average value of BNPL debts amongst clients was $2,200.”

Women under the age of 25 were the most likely to seek help for BNPL debts and many clients had multiple BNPL debts and repayments on the go.

Financial Counselling Australia CEO Fiona Guthrie said the Tasmanian report confirmed what other financial counsellors were seeing across the country.

“These findings back what is happening nationwide - soaring numbers of people resorting to BNPL just to get by and, consequently, soaring numbers of people dealing with BNPL debts,” Guthrie said.

Food is one of our biggest money worries right now. Finder’s recent Cost of Living report found 43 per cent of Aussies were stressed about grocery costs, ahead of housing (42 per cent), petrol (26 per cent) and energy (23 per cent). Half of Aussies had been forced to cut back on their grocery spending to cope with the rising costs.

Anglicare is calling for better regulation of BNPL products and wants the products to be regulated in the same way as other credit products, including credit cards and personal loans.

It also wants the government to increase income-support payments so people don’t have to rely on BNPL or high-cost credit products.

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