GOVERNMENT’S NEW FEE ON BNPL COULD HURT CONSUMERS BY $450 MILLION AND DRIVE THEM BACK TO HIGH INTEREST CREDIT CARDS

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The new Buy-Now-Pay-Later (BNPL) fee the federal government is considering could hurt consumers by a whopping $450 million. This is how much customers would pay if merchants passed on their BNPL fees. 

This new fee will not only disproportionately hurt young people as their economic future has never been more uncertain, but it will likely result in them being driven back to high interest credit cards. 

Yesterday RateCity reported that the national credit card debt accruing interest has dropped by over half a billion dollars in one month. This new fee added to interest-free BNPL could undo this great result.

BNPL is a genuine and competitive alternative to credit cards, and a good one at that. This is evidenced by the banks rolling out their own BNPL products as a response. However the good work is not finished:

  • ASIC recently confirmed that 1.9 million Australians were in persistent credit card debt, with
  • Credit cards charging in excess of 20% in interest are commonplace. It could be worse as current
  • Federal law caps the total amount of fees and charges on loans such as credit cards at 48%.

Considering this, it should come as no surprise that The Australian Financial Complaints Authority receives 14x more complaints about credit cards than BNPL products.

SmartWayToPay spokesman David Liston today commented on the proposed new fee for BNPL use:

“I have no doubt that adding new fees to BNPL will drive consumers back to far worse financial products.

“There is still a long way to go to break the revolving debt cycle that credit cards can put people in, and I believe that interrupting this process is only good for banks and certainly not good for consumers.

“The proposed new fees being applied to the highly innovative and competitive space that is BNPL will undoubtedly stifle competition and primarily serve to hurt consumers and in particular; young people. 

“We here at SmartWayToPay always say that the smartest way to pay for anything is with the money you have. However if you don’t have cash on hand, BNPL is a far smarter option than credit cards.”

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