The new (and more dangerous) Lay-by…

The new (and more dangerous) Lay-by…

8 September 2017 - posted in Pre-Retirees and Retirees by Michelle Sanchez-McCallum


You’re a self-confessed shop-a-holic. You see that pair of Manolo Blahniks you’ve been obsessing about on the sale table. It’s fate. What else could it be?

You can’t go another day without having them. Owning them. Matching them. You quickly look at the price tag on the sole and your heart sinks. The sale price; $700…. and payday isn’t until Friday! Your mind races. You start thinking of radical, yet totally feasible ways to get them. I’ll sell gram gram’s antique locket! Blood! A kidney! The dog! 

Then……..like an oasis in the desert, in your peripheral vision you glance at the sign at the register and see those three magical words: “ZipPay.available.here”. The heavens open up, a ray of light beams down, angels start humming in chorus. Your world is whole again. You will own those adorable Manolos today!

ZipPay and Afterpay amongst others are the new “Lay-by”, but you get to take the items home straight away and pay for the item gradually in a series of installments, so it’s especially enticing.  The need for patience and self-restraint is over. Buy now, pay later interest-free loans for buying stuff. I mean really, it can only be described as a gift from the retail fairy. And those shoes are to die for, so you’d be crazy not to! These services cost nothing to set up and there is no “interest” as such. But you know the saying, if it sounds too good to be true, it probably is. So before you get carried away, here are a few things you should know; 

Afterpay

Afterpay requires repayment of the purchase price in fortnightly installments over 8 weeks and doesn’t offer the flexibility to change the repayment schedule. So if you receive unexpected bills in the meantime and can’t pay on time, don’t expect to negotiate with a kind and gentle debt negotiation lady. They take no prisoners. Instead, you’ll get charged late fees until you can make the required repayment.

The repayments are deducted from a credit or debit card. So if you’re using a credit card and can’t repay the balance during the interest-free period, you might end up paying a substantial amount in credit card interest too. Just think, you could have bought a second pair of heels with the late fees and interest charges you paid! That’s just too catastrophic to think about!

 

ZipPay

ZipPay, on the other hand, offers more flexibility in making repayments and the timing. There is a minimum monthly repayment of $40. The downside is that there’s a monthly fee applied while there’s any amount still owing, however small. If you don’t repay the balance fairly quickly, the monthly fees could add up.

You need to be disciplined in making repayments or you could end up owing money for a long time, which could affect your ability to get a home loan if and when you need one. Let’s just weigh that up for a sec; house? Manolos? house? Manolos? It’s a tough call, but I think you know where I’m going with this.


 

On a more serious note, as a Financial Adviser, my concern with these sorts of services is that the instant gratification can be addictive and that instant gratification can cost a lot in the long run. It is important to learn the skill of saving and services like Afterpay and ZipPay can undermine that, and with the increasing popularity of these types of payment arrangements within the 20-30+ age group (particularly females), it could spell a real disaster for their ability to save for things like house deposits, emergency funds or pay off more significant debts like HECS.

While not clinically diagnosed, most of us have a little shop-a-holic buried inside of us which we are trying hard to suppress. As ladies, we sometimes feel like we need a pair of designer shoes\ handbag etc in our lives, but impulse buying might not be the way to get them. In my expert opinion, save your money and buy them when you have had the discipline to save for them. By the time you do, the desperate urge to have them might have passed. Stop….don't roll your eyes, it’s true! Ask yourself, do I really need them right now? No, wait! Don’t answer that….yet….  


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