We’ve all seen those tempting Buy Now, Pay Later (BNPL) ads pop up while shopping online—Afterpay, Klarna, Zip—just to name a few. They make splurging on that cute handbag or the latest iPhone feel oh-so-easy. But the reality is while BNPL is super convenient, it can also create financial headaches if we’re not careful.
A recent study found that 11% of women use BNPL services, compared to just 5.5% of men. With the current cost of living crisis, many women are using BNPL not just for luxuries but to also cover essentials like groceries and bills. It’s evolving from a splurge tool into a budgeting strategy, with 33% of women saying they would consider using BNPL for necessities in the future in a recent survey.
However, Kerry Sainsbury reminds us, “When we want to achieve bigger goals, like buying a home, we need to think long-term.” Quick fixes can sometimes lead to bigger financial challenges down the road.
With this in mind, we’re launching our first interview featuring inspiring Australian women who are shaking things up in finance. At Penny, we’re all about supporting each other and celebrating female founders, starting with Kerry, the powerhouse behind Credit Success. Since its launch in October 2022, Credit Success has been helping women repair their credit and navigate the often-confusing world of finance.
So here are some of Kerry’s suggestions on how to handle BNPL like a Pro…
Don’t be confused by gimmicks, Buy Now Pay Later can affect your credit
You might see BNPL as harmless fun, but in reality, it can affect your credit score. “Every time you open a new BNPL account or increase your credit limit, your score can take a hit—sometimes by as much as 150 points.” With credit scores ranging from 0 to 1200, those dings add up. And here’s the kicker: Every missed payment stays on your record for 24 months. If you’re not careful, you might find it harder to get a mortgage or a car loan later on. Don’t be confused by the marketing, Buy Now Pay Later can impact your
Stick to One Account
It’s tempting to open multiple accounts, but each new one can hurt your credit score. Keeping one well-managed account can make you look like a savvy spender rather than a credit risk. A long-standing account with consistent, on-time repayments can show you’ve got it together.
Close Unused Accounts
Got old BNPL accounts you don’t use? Close them! As Kerry advises, “If you close that account, it will instantly lift your credit score by up to 70 points.” —talk about a quick win! Keeping old, unused accounts open is like carrying around financial baggage you don’t need.
Consolidate Your Debts
If you’re juggling multiple BNPL accounts, consider consolidating them. It simplifies your payments and helps improve your credit over time. Plus, it’s a lot easier to keep track of one monthly payment instead of five.
Communicate with Creditors
If you’re struggling to keep up with payments, reach out to your creditors – they’re required to help you. Being upfront about your situation can lead to better solutions and could prevent damage to your credit score.
Find a Trusted Broker
A good broker can help you manage your credit and stay on track for your financial goals. They can also help you navigate your options and ensure you’re on track to reach those milestones.
BNPL can be a lifesaver for managing cash flow, but it can also lead to debt if we’re not careful. Understanding how it impacts your credit and taking proactive steps to stay on top of it is essential. Whether it’s closing unused accounts, consolidating debts, or seeking professional advice, being proactive is key.
Keep empowering yourself with financial knowledge and make decisions that align with your long-term goals. For more tips and insights, join the conversation with the #PennyCommunity!