Families are using buy-now pay-later schemes to pay for groceries, meat and home necessities as food costs soar. This alarms budget advisers, with one saying it can be a slippery slope. However, buy-now pay-later merchants say the vast majority of instalments are paid on time and protections are in place
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Bay of Plenty families using buy now pay later options to buy groceries at The Warehouse
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Orbe said she “never had to pay late fees” and ensured her payments were made by the due date.
“The app encourages you to pay on time by earning points every time you make on-time payments and you unlock perks.”
Buy-now pay-later schemes help families put food on the table
Rotorua woman Liv Lambert-Tahuri said a buy-now pay-later card was “good for using on food at The Warehouse”.
“I find it helps so much during the school holidays when my sons suddenly have extra stomachs.”
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A Bay of Plenty woman who spoke on the condition she was not named said the payment option could help put food on the table.
“If spreading out payments is necessary for them to eat, kei te pai.”
A woman from Mount Maunganui said a buy-now pay-later card could be “handy for those weeks when you’re short”.
A spokesperson for The Warehouse Group said the store had “fresh produce” in 22 stores including The Warehouse Rotorua and Fraser Cove in Tauranga.
“Essentials like Weet-Bix, milk, bread, butter, pasta and spreads are where our focus is.”
The Warehouse’s customers could choose from a number of different payment options, the spokesperson said.
‘Slippery slope’ if you can’t afford the cost
Rotorua Budget Advisory Services manager Pakanui Tuhura said the main reason people used buy-now pay-later was convenience.
Tuhura said people would often buy “food, meat and other goods” online or in person using a buy-now pay-later card.
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He said the biggest advantage was a secure way to pay online and the biggest disadvantage, in his view, was it “provides too much convenience and potential for impulse buying, especially online”.
“BNPL issues have become quite common amongst our clients over the past couple of years. We don’t advise them to use one of these cards.”
Bay Financial Mentor general manager Shirley McCombe said in her view, there were “very few advantages” to a BNPL payment.
“It may allow a person to shop this week, but it will move and compound the problem for the following weeks. [In my view] it is a very slippery slope.
“We see clients that owe hundreds of dollars each week in BNPL.”
Buy-now pay-later merchants respond
An Afterpay New Zealand spokesperson said it was important consumers had “access to a safe, simple and transparent solution” for everyday items like groceries or one-off purchases like a new refrigerator.
They said in Afterpay’s last earnings report in third-quarter 2023, “the majority of customers continue to use BNPL safely and effectively”.
The Afterpay spokesperson said 95 per cent of all instalments were paid on time and 98 per cent of all purchases incurred no late fees.
“Credit cards have been used for all kinds of purchases big and small for more than 20-30 years, and now we clearly see people preferring an option like Afterpay.
“While situations where a customer has existing outstanding obligations to another BNPL provider may represent a very small percentage of our users’ circumstances, we’re committed to ongoing improvements.”
A Zip New Zealand spokesperson said it offered customers an interest-free alternative to high-cost credit cards.
“Our late fees are capped ... where a customer fails to make a repayment, their account is frozen and they are unable to make further transactions.”
Zip said two per cent of customers in the past 12 months had fallen into “temporary financial hardship”.
A Klarna spokesperson said they believed “people should pay with the money they have first and foremost” but a BNPL option gave people choice.
The Klarna spokesperson said the company had “several safeguards to prevent consumers from taking on too much debt”.
“We conduct robust eligibility checks on each and every transaction so we have a real time view of someone’s financial circumstances and we restrict our services if there’s missed payments to stop debt building up.
“We have a number of protections in place to protect consumers and ensure that they understand how our products work and are able to meet repayments.”
Consumer credit demand increases
Centrix managing director Keith McLaughlin said BNPL consumer credit demand was up 3 per cent year on year in January 2024.
“We saw an uptick in consumer credit demand in December and January across both personal and buy-now pay-later products.”
McLaughlin said this was likely because “people turned to credit to take advantage of the holiday retail sales season”.
In December, there was an increase in arrears with 439,000 individuals falling behind on payments, which represented a month-on-month increase of 4000, he said.
Ministry of Business, Innovation and Employment national manager of consumer services, Simon Gallagher, said schemes such as Zip and AfterPay “can help smooth out your spending, so long as you don’t buy more than you can afford”.
Gallagher said the payment option was a “form of short-term debt” but it could be a “better alternative to high-interest options like credit cards or loans”.
MBIE national manager of consumer policy Glen Hildreth said from September 2024, buy-now pay-later providers would be required to comply with key consumer protections provided by the Credit Contracts and Consumer Finance Act.
Michaela Pointon is an NZME reporter based in the Bay of Plenty and was formerly a feature writer.