INSIGHTS WITH EVALESCO
The buy now, pay later (BNPL) market has exploded in Australia over the past couple of years, as new players like Humm and Klarna join more established market favourites like Afterpay, bringing a variety of product offerings, including different maximum balance amounts and repayment schedules. Shops around the country are signing up to make these flexible repayment tools an option for their customers.
So, what does this mean for the consumer, and how does BNPL compare to traditional credit cards?
Both BNPL and credit cards allow the purchaser to delay handing over a total purchase amount at the time that they buy a product. Which BNPL product you choose will determine your repayment schedule, both in terms of the minimum necessary instalments and the timeline for making your repayments, such as Afterpay, requiring four repayments every two weeks while Humm allows up to five repayments on a fortnightly basis for purchases under $2,000. Crucially, most BNPL services charge no interest, allowing you to make timely repayments of the total amount at no extra cost.
Credit cards also give you a chance to make your repayments at no extra cost. Most come with an interest free period – on average around 44 or 55 days – meaning that effective management of your repayments can see you swerve any extra charges. However, if you fail to make all of your repayments within this window you’ll be charged interest on what you haven’t paid back. Interestingly, and perhaps inspired by growing consumer trends towards BNPL, a number of credit card providers are now offering 0% interest products – like CommBank’s Neo card.
Fees and charges
There are fees and charges associated with both BNPL services and credit cards. While there’s no formal ‘interest’ on BNPL repayments, providers will charge a late fee if you do not repay what you owe according to the schedule, and these fees can increase with each late repayment or follow-up reminder. In addition to charging interest, credit cards usually come with a sign up fee and an annual fee, although occasionally these will be waived in promotional periods.
Be sure to look into all the fees and charges associated with a financial product before making a commitment.
Signing up to BNPL and obtaining a credit card have relatively similar rules. Both require users to be Australian residents over 18 years old, and both reserve the right to perform a credit check to ensure you are equipped to make repayments.
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We believe the true value of financial advice isn’t found in dollars and cents (although this is important too!) but in the peace of mind a financial plan can provide. It’s knowing where you want to go and how to get there, with a dedicated team behind you every step of the way.
We know the impact of good holistic financial advice can make and we have the life experience, technical capability and quality support team that can make that difference for you. We’ve empowered over 1000 families through the delivery of great financial advice, to be healthy, wealthy and happy.
The amount of super you’ll need when you retire depends on your big costs in retirement and the lifestyle you want. The Associate of Superannuation Funds of Australia (ASFA) estimates for a single $44,224 a year and for couples $62,562 a year is how much you may need. This is only an indicator and our advisers assess everyone’s individual circumstances.
The fees we charge for financial advice is only a fraction of the value we derive for our clients, meaning our clients are always better off after seeing us. Rarely do we encounter a new client invested appropriately for their needs, with adequate risk protection, structuring and estate planning provisions in place. Even small tweaks to a financial plan over a long period of time can result in drastically better outcomes for our clients which eclipses the fees of the financial advice. Additionally, you can opt-out of an ongoing fee arrangement at any time.
In our discovery meeting with you our advisers discuss the initial advice fee and the ongoing fees associated with our services.
After our initial phone call to discuss why you are seeking a financial adviser, we arrange a discovery meeting that outlines what is important to you, your current position, our areas of advice, our approach. We then present a Statement of Advice (SoA) to discuss your goals and our recommendations and go through the steps of how to proceed to the implementation stage. After signing the SoA, we discuss your questions, get you to sign the authority to proceed and complete any application forms before implementing the recommendations detailed in the SoA.
One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future
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