Fewer Australians are utilizing purchase now pay later providers through the pandemic, whereas bank cards stay to be probably the most most popular non-cash cost methodology, new analysis confirmed.
Almost one in eight customers stated they used purchase now pay later platforms within the six months to June 2020, a ME Financial institution survey of 1,500 indicated. This can be a decline from about one in six customers within the six months prior.
Most individuals opted for the extra conventional type of credit score through the pandemic, as bank card utilization remained secure up to now yr. Forty-six per cent of Australians used their plastic to make cost within the first half of 2020, the identical degree because the earlier half yr.
That is regardless of a report from Energy Retail suggesting earlier this yr that purchase now pay later customers had surged by 12 share factors to 39 per cent in 2019, whereas bank card customers had dipped by six share factors to 29 per cent.
The proportion of individuals shopping for with lay-by at retail shops dropped off to five per cent from 8 per cent, whereas the extent of unsecured private loans accessed remained unchanged at 4 per cent. Utilization of pay day loans halved, with only one per cent of these surveyed counting on short-term credit score for funds.
Australians tread rigorously with credit score
The findings come as knowledge from the Reserve Financial institution of Australia, launched at the moment, confirmed the variety of private bank card accounts has fallen by 9 per cent, or about 1.3 million.
ME normal supervisor of private banking, Claudio Mazzarella, stated Australians have gotten extra cautious with how they entry credit score, due to COVID-19 and the financial downturn.
“It doesn’t matter how revolutionary the lending methodology is, most Australians are cautious of stepping into extra unsecured debt within the midst of a world and home financial disaster,” he stated.
“Purchase now pay later actually hasn’t changed the bank card but. Bank card utilization is holding regular whereas purchase now pay later is dropping.”
Mr Mazzarella stated Australians are taking a wait-and-see method to borrowing through the coronavirus-induced recession.
“Most Australians are financially savvy. They know spending is spending, and debt is debt. Many households have taken a extreme monetary hit to incomes and been compelled to chop again on spending, or they’re prudently ready to see how this pandemic performs out earlier than borrowing extra.”
He famous that customers who use purchase now pay later are typically sometimes “youthful and fewer financially comfy”.
“They could be cautious of bank cards on the whole or unable to qualify for a bank card,” he stated.
Based on ME analysis, the typical purchase now pay later consumer might be:
- Feminine.
- Gen Z (18-24) or Gen Y (25-34).
A single guardian (if they’ve kids). - Holding lower than $1,000 in financial savings.
- A pupil, part-time employed, dwelling duties or unemployed.
- Receiving some type of authorities help.
- Renting.
- In the event that they personal or are paying off a house, the property is valued at $300,000 or much less.
Do you have to use a bank card or purchase now pay later?
Totally different customers will want to make use of totally different cost strategies, relying in your spending degree, way of life and intentions. For those who’re tossing up between your plastic or newer purchase now pay later providers, one of many first issues to match is the price of utilizing both. For bank cards, this might be the acquisition or rate of interest and any annual charges, and for purchase now pay later, this might be potential late cost charges or different expenses. Some bank cards can cost an eye-watering 20 per cent buy fee, so it’s finest to search out out the main points earlier than committing.
One thing else to weigh up is a bank card’s interest-free interval, versus a purchase now pay later platform’s instalment interval. Whereas every supplier can have a special coverage, you could anticipate to have extra time to repay your purchases with an extended interest-free interval or instalment interval.
For a extra detailed breakdown, take a look at RateCity’s comparability of bank cards and purchase now pay later platforms.
How Aussies accessed credit score up to now six months
| Lending Sort | June 2020 | December 2019 | Change (% factors) |
| Bank cards | 46% | 46% | — |
| Purchase now, pay later | 13% | 16% | -3 |
| Lay-by at retail shops | 5% | 8% | -3 |
| Unsecured private loans | 4% | 4% | — |
| Pay day loans | 1% | 2% | -1 |
| None of those | 40% | 38% | +2 |
Supply: ME Financial institution.
