What to look out for before you sign up to buy now pay later.

Buy now pay later services made $78 million in revenue in the quarter ending June 2018 – impressive for a service that charged “no interest rate”. Since these services were introduced the average transaction has reduced in value which means it is now more likely to cover everyday expenses rather than bigger purchases.

When you use a buy now pay later service, you can buy a product and delay payment. You usually pay off your purchase over a few weeks. For bigger purchases, it may be longer. You don't pay interest on the purchase. Instead, you're charged fees, and they can add up quickly.

While buy now pay later services can be convenient, it can make it more difficult to track your spending. Before you sign up, keep in mind:

• It’s easier to overspend – you can over-commit to spend on things you can’t afford

• Costs can add up – you are charged fees and costs to use the service

• It can be hard to manage – if you sign up for more than one service, it can be hard to keep track of payments

• It might affect a loan application – lenders consider buy now pay later spending when you apply for a car loan or mortgage

• Late repayments can appear on your credit report – this affects your ability to borrow money in the future

• Lay-by can be cheaper – lay-by has no account keeping or late fees

In 2018, ASIC research into buy now pay later services found that to meet repayments, one in six consumers had either:

• become overdrawn on their linked bank account

• had to delay other bill payments, or

• borrowed money from family and friends.

Buy now pay later services are often advertised as 'interest-free' or '0% interest'. But they charge fees that can add up quickly. They may charge:

• Late fees — if you miss a payment or pay late, up to $15

• Monthly account-keeping fees — a fixed monthly fee, up to $8 a month

• Payment processing fees — an extra fee of around $2.95 each time you make a payment, on top of your set repayment

• Establishment fees — For some, there are no establishment fees, but for others can charge up to $90.

You may also have to pay bank fees:

• Overdrawn fees — if you don't have enough money in your account to cover the repayment

• Interest — if you are paying by credit card

Instead of using these types of services for Christmas maybe consider using the setting up round2save on your Beyond Bank account.