Buy Now Pay Later (BNPL) services have transformed the way Australians shop, offering smaller, bite-sized payments for big purchases. As of July 2024, 43% of Australian adults reported using BNPL in the preceding six months - equating to around 8.6 million users. According to our customer data of debt management solution enquiries, the average BNPL debt in 2024 was $3,713, accounting for an average of 15% of each person's total unsecured debt. Debt levels varied significantly:
- By State: NSW had the highest average BNPL debt ($5,763), while ACT was the lowest ($2,815).
- By Living Arrangement: Homeowners with a mortgage had the highest average debt ($4,245), followed by renters ($4,066).
- By Age: Young adults aged 18–24 carried the highest average debt ($7,961), while those aged 25–30 had the lowest ($2,900).
While BNPL offers convenience, it can lead to unnecessary costs and financial stress without careful management. Let’s explore the most common mistakes and how to avoid them.
1. Overlooking the True Cost of BNPL
BNPL makes purchases feel affordable - no upfront payment, no interest - but the real cost isn’t always what it seems. Late fees, monthly account charges, and penalties for missed payments can quickly add up, turning small, manageable installments into a much larger expense. On top of that, when multiple purchases overlap, those "easy" payments can snowball into financial stress. Over time, BNPL can become far pricier than simply paying upfront.
How to Avoid:
Before committing, calculate the full repayment cost, including potential fees, and see how it fits into your budget. Be honest with yourself: if the total cost feels like a stretch, it’s better to hold off. Treat BNPL like any other loan - know what you’re agreeing to, and don’t let small payments blind you to the bigger picture.
2. Losing Track of Purchases
It starts small - one payment here, another there. But with multiple BNPL purchases or accounts across different providers, things can quickly spiral out of control. Each provider may have its own repayment dates and terms, and without careful tracking, it’s easy to miss payments or underestimate how much you owe.
How to Avoid:
Simplify your approach by sticking to one or two BNPL providers. Keep a list or use an app to track your purchases and repayment dates in one place. Better yet, automate your payments so you never miss a deadline. Staying organised is key to avoiding late fees and staying in control.
3. Ignoring Late Payment Fees
A missed payment here or there might not seem like a big deal, but those late fees can snowball fast - especially if you’re juggling several BNPL plans. What started as a straightforward payment plan can quickly become a financial burden.
How to Avoid:
Set yourself up for success by automating your payments or setting reminders for due dates. It’s a small step, but it can save you from unnecessary fees and the stress of falling behind.
4. Using BNPL for Impulse Buys
It’s easy to get caught up in the moment when using BNPL. The ability to split payments into smaller chunks makes it feel like you’re not spending much at all. But that same convenience can make impulse purchases far too tempting. Before you know it, your payments pile up for things you didn’t truly need, leaving your budget stretched thin.
How to Avoid:
Pause before you purchase. Give yourself 24–48 hours to decide if the item is genuinely worth it. Ask yourself: Does it fit into my budget? Is this something I’ll still want or need a week from now? Taking a moment to step back can save you from buyer’s remorse - and an overextended budget.
5. Assuming It Won't Affect Credit Score
BNPL might seem separate from your credit score, but it’s not always the case. Some providers perform credit checks when you sign up, which could slightly lower your score, and others report missed payments to credit bureaus. While Afterpay won’t check your credit or report late payments, services like Zip Pay or Klarna might, especially for larger purchases or defaults.
In addition, the Australian government is introducing new regulations to better protect BNPL users. A new category of "low-cost credit" has been created under the Credit Act to regulate BNPL providers. While the legislation has been passed, it’s not likely to come into effect until later in 2025. These changes will require BNPL providers to hold an Australian credit licence and conduct affordability checks for credit amounts over $2,000, aiming to reduce financial risks for consumers.
How to Avoid:
Before you sign up, take a few minutes to research the provider’s credit policies. Some might seem low-risk but have hidden implications. Stick to repayment plans you can comfortably handle, and set up automated payments or reminders to avoid defaults. Protecting your credit score is much easier than fixing it later.
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6. Using BNPL For Essentials
Turning to BNPL for necessities like groceries or bills might seem like a quick fix, but it can lead to bigger issues down the road. Essentials are recurring expenses, and relying on BNPL to cover them often creates a cycle of debt, where repayments overlap with new purchases. What starts as a small convenience can quickly snowball, leaving you with more debt than you can manage.
How to Avoid:
Reserve BNPL for non-essential, one-off purchases that won’t strain your finances. If you’re struggling to cover everyday needs, it’s a sign that a different approach might be needed. Building a budget or reaching out to a financial counselor can help you find sustainable solutions without leaning on BNPL as a safety net.
7. Overestimating Ability to Repay
BNPL makes things feel affordable - after all, breaking a big purchase into smaller chunks seems simple enough. But it’s easy to overestimate what you can realistically repay, especially when other financial commitments start piling up. Missing payments doesn’t just add fees; it adds stress, too, as repayments grow faster than expected.
How to Avoid:
Before clicking “buy,” take a hard look at your budget. Are there other obligations - rent, bills, groceries - that you need to cover first? Treat BNPL payments like any other essential expense. If the purchase would stretch your finances too thin, it’s better to hold off.
8. Choosing the Wrong Provider
Not all BNPL services are created equal. Some have stricter repayment terms, higher fees, or policies that could even affect your credit score. Signing up without knowing the details can lead to unexpected costs and unnecessary complications.
How to Avoid:
Do your homework. Compare providers based on their fees, repayment flexibility, and customer reviews. Look for one that’s transparent about their terms and aligns with your financial needs. A little research upfront can save a lot of headaches later.
9. Using BNPL as a Long-Term Solution
BNPL might work well for the occasional purchase, but using it regularly - especially for essentials - can create a dangerous cycle. Relying on it too often can leave you stuck, unable to tackle your overall financial challenges.
How to Avoid:
Keep BNPL for rare, manageable purchases, and focus on building a buffer for your regular expenses. Setting up an emergency fund or a sustainable budget is a far better long-term solution. If things start to feel overwhelming, don’t hesitate to reach out for professional financial advice. There’s no shame in asking for help to regain control.
If You Are Struggling with BNPL Repayments
If BNPL repayments have become overwhelming, there are steps you can take to regain control and alleviate immediate financial stress. Explore our Debt Management Solutions, which can incorporate your BNPL debt and reduce it. Our team of Customer Success Specialists are available to provide support and advice tailored to your specific situation—get in touch with us today on 1800 534 534. At Revive Financial we offer professional assistance through various solutions designed to help you take back control of your finances and work toward becoming debt-free.
