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Geri Cremin
CreditSmart Credit Reporting Expert
Published on: 25 Nov 2021

Christmas is fast approaching, and we all deserve to celebrate with friends and family after another challenging year. But just as there’s the temptation to overindulge with food and drink, it’s easy to overindulge on spending at this time of year – and the debt can be hard to shift, hanging around long into the new year.

With generous spirits running high, easy-to-access credit is often the fastest way to rack up debt over Christmas. In the past, that was mainly credit cards but now there are more credit options and they are even easier to access – such as buy now pay later (BNPL).

There’s no doubt that BNPL services are popular because they are convenient and easy to access at the point of purchase. There’s a bewildering array of BNPL choices from Afterpay and Zip Pay to PayPal, LatitutePay, and Humm – and now even the banks are offering their own BNPL options.

But, while BNPL products may be easily accessible, keep in mind that BNPL is a form of credit and should only be used for things you need and can afford.

Depending on the BNPL provider, when you open a BNPL account they may or may not do a credit check or assess whether you’ll be able to meet your repayments. So, it’s buyer beware.

And keep in mind that just because a BNPL might not do a credit check, it might still impact your ability to access other credit in future. When you seek other forms of credit, lenders who check your expenses will see BNPL transactions going through your bank accounts. And if you default on your BNPL arrangement a default can be placed on your credit report.

BNPL services are a good fit for people that make their repayments on time and use it as a budgeting tool to plan their purchases. But unfortunately, for some it can be an easy way to take on debt beyond their financial capability.

With all this in mind, here are some tips for consumers to manage BNPL services over Christmas:

  1. Make a budget and stick to it. Know what you can afford to spend and make sure you can afford to repay any debt you rack up.

  2. Be conscious of all your repayment obligations. Just because its Christmas doesn’t mean the regular bills won’t still come in. So, make sure you can afford your BNPL repayments will also covering your other expenses and other debts like your mortgage, car loan or credit card.
  3. Know your limits. Keep track of your BNPL usage and put a limit on it yourself. Just because you have an unused limit on BNPL doesn’t mean you have to use it. Set your own limit and if you get close to it avoid further use until you have paid off your existing debt.
  4. Link your BNPL account to your debit card instead of your credit card. Paying off BNPL from a credit card is just deferring the debt – using a debit card means you're using your own money and might be avoiding credit card interest.
  5. If you are struggling to keep up with your payments, speak up. If you cannot make your repayments, speak to your BNPL provider, and ask how they can assist you.

So, if you’re going to use BNPL this Christmas, look after your credit health.

Digital Agency: SGY