Buy now, pay later versus credit cards.

The truth you need to know and understand to thrive financially.

Good morning everyone, It's Canna Campbell here and welcome back to another episode of Sugar Mumma's Fireplay, the podcast where we spark financial independence together.

We feel your early retirement dreams, and I helped give you the tools to build real, sustainable wealth and independence.

Now today we're talking about something I have been seeing everywhere on TikTok, Instagram and even conversations with friends, and that is jen Z saying no thanks to credit cards and yes please to buy now, pay later.

And honestly, I get it.

I completely understand it, and I even occasionally use buy now, pay later because I don't own a credit card.

See, credit cards.

Have become I guess the bad you know, the today's days like bad bad boy.

You know, interest rates can be up to like twenty percent per animal the credit card, and then there's lots of traps with fine print and the history of pushing people into like a debt spiral that can sometimes take people years and years to escape.

And gen Z have eyes wide open and they're smart, and you know they've seen what's happened to their parents, their older friends, even influences they might follow, and they don't want to buy of it, which is smart.

But here's the thing.

Whilst buy Now Pay Later feels safer, you know there's no interest, so you've got a quick approval, the repayments are much smaller and spread across you know, four to six or eight repayments.

It can still quietly create the same financial headache as a credit card can if you're not managing by Now Pay Later correctly.

And the thing with buy Now pay letter is it is so easy to access.

It can even be more tempting to actually overspend and harder to actually spot when it becomes a problem.

And before you know it, you've got five different by Now Pay Later payments going on three already defaulting.

You're getting text messages saying this is overdue, and you're starting to not open.

Up your inbox and see what emails are coming in.

Now.

This episode isn't actually about telling you not to use by Now Play Later, or never to even think about using a credit card and just to spend cash.

That's not what I'm about.

What I want to do from today's episode is give you the facts explain the risks, but also share some really helpful smart habits that allow you to use any form of credit so that you stay in control at all times and not make whatever decision you make being about repayment schedules, because for me, your financial goals I think are way too important to ever lose momentum because you have damaged your finances over a pair of shoes that you saw on sale or a last minute concert ticket.

So from today's episode, I guess.

I want to just explain why by now Pay Later looks so appealing and obviously the traps that you may not be able to see right.

Now, how to use it without.

Buy now pay later, using you and my five Golden rules when it comes to using by now pay later, so you can actually enjoy it in the convenience of it without ever sacrificing your financial freedom.

And as mentioned, I occasionally will use by now Pay Later.

So let's get into it.

So, first of all, for those of you who didn't realize this about Gen Z, like why is this generation completely ignoring credit cards?

Let's start with the elephant in the room.

So Australians, particularly this generation, are actually avoiding credit cards completely and I had a really conversation with my O pair who's twenty, and she's like, I never want a credit card.

I think it's the worst thing ever.

I've watched my friends get into so much debt.

It physically frightens her.

It gives her anxiety.

And you know, for decades, credit cards, you know, were a grown up financial products of our time.

You know, they're there with the ultimate sign of independence and success.

But now this generation, and even sometimes to myself, they've been recast as the villain, and at times within reason good reason.

You know, the interest rates, as I said, hop her, around twenty percent or sometimes even higher.

There are hidden fees like annual fees, and you know, repayment fees, and then there's like sneaky charges like surcharges, and then there's the trap of minimum repayments that I think are the worst things about credit card because they keep you in debt for years.

And here's a reality check.

A credit card with a balance at five thousand dollars at twenty percent interest is when you're only making the minimum repayments, could take you decades to pay off that and actually cost you thousands of dollars in interest over the long run in gen Z has grown up in the shadow of this, like you know, two thousand and eight GFC, the pandemic rising costs of living, and now we've got obviously the housing affordability crisis.

They've seen their parents, have seen their older friends, they've seen people online weighed down by this type of debt, and they don't want to do that for themselves or to themselves.

And they are thinking ahead of things like you know, the aspirations of buying a home and still building an investment portfolio.

And they know that even a small amount of credit or access to credit through say a credit card, can reduce their borrowing power.

So what they've done is turned into something that feels safer drum roll, buy now, pay later.

But it's not really quite as it seems, so let's go through that together.

By now pay later has you know, marketed itself brilliantly, and this is why it looks and feels so enticing.

First is there's no interest now that alone sounds like a massive win.

And then there are small repayments.

Because you're breaking one large purchase into say four or six payments, it feels so much more manageable to our cash flow.

It sometimes even feels like cheaper and even a little bit more responsible.

And then if you ever applied for buy Now, Pay later, you'll know that it's pretty much an instant approval.

There's no long forms, there's no scary credit checks, You're not having to submit you know, payments or pacelips or tax returns or anything like that.

It's really fast and it does kind of feel modern.

You know, there's no physical card.

It's literally using passwords to log in, and it's built into the sort of online checkout or even in store payment terminals where you literally don't even need to to go and find your wallet or look up your bank details.

You can literally pay for something with just a tap with your finger.

So on the surface it looks really smart.

It is a great alternative, you know, from a surface level point of view, then a credit card, and for some people who use it properly, it can be a tool that helps, you know, smooth out your cash flow.

I remember when I first leart learning about by now pilater, I was really against it, but I actually had some of my younger staff actually say no and explain to me how they were using it, and they were using it as a cash flow tool a budgeting tool, and they shared a couple of stories with me.

I was like, actually, that's pretty savvy.

But the thing is, and he's the kicker.

Just because it's interest free doesn't mean it's free of risk.

What people don't always realize about by Now Pay Later is there's no affordability checks done by these providers.

Unlike credit cards, most buy now pay laters don't have to check if you can actually afford the repayments, which I think is pretty messed up.

That means it's so easy for a very innocent person to sign up for multiple by now pay Later accounts without realizing actually how much they are going to have to commit to for each pay cycle.

And this is where we see people with like you know, five, six, seven or even eight.

I saw recently different by now the payments going and they, yes, they were all spinning out of control and not being repaid.

The second thing about people don't realize about by Now pay Later is the late fees really do add up.

It sounds like it's only going to be ten dollars or maybe twenty dollars, but some of these services actually have no cap on the late fees.

So one hundred dollars item could actually end up costing you one hundred and forty because of all these late fees, and if you've missed a payment, and those payments and fees then really start to stack up, so it actually could cost you so much more than what you've actually purchased.

And then I hate to tell you this, but it can actually impact your credit score.

So missed payments or where you've defaulted are reported to the credit bureaus.

Now, this does then make it harder to be able to borrow money, for example, to buy a home, or to take out a car loan, or to borrow money to invest, or even get out of rental approval.

So you need to know this is not as safe as it may sound.

Also, buy now pay Later, which no one really talks about, is and if you use buy now, Pay Later, you'll get this completely.

But it actually encourages impulse spending.

When you see something you like and think, oh, that's so nice.

It's like six hundred dollars, I can't actually afford that, but oh look they offer buy now, pay later.

I'll just you know, pay it off over installments and I'll pay it off later.

Mentality, this makes it far easier to actually to fy that large, expensive purchase that you wouldn't normally make.

You're thinking, oh, it's fine, I'll just you know, take it out slowly, over timing.

I'm not even going to notice those small amounts of money it's being taken out of my account over that six week period.

It's fine, I don't worry.

This is the problem.

We're spending way more money than when we realize, and the same with also with credit cards.

The next thing is is no visibility.

If you are not tracking, you're buy now, pay later spending.

It is so easy to forget that you've got forty dollars here, eighty dollars there, and it's sixty dollars there, and then all of a sudden you are juggling hundreds of dollars in multiple repayments coming out at multiple times of your pay cycle or of the month, which means trying to put that into your budget can be increasingly hard.

And I will come to the rules that I follow when it comes to buy and now pay later.

But this is where things get messy, and this is where you see people get into so much trouble with this.

Now I want to be also clear, this isn't about criticizing gen Z.

In fact, I actually think gen Z has done something really powerful for because they've actually opened up a conversation about debt and in a way that no other generation has.

You know, they're talking about credit card anxiety, they're questioning the system, and they're looking for all alternatives and they're happy to share their alternatives with everyone else that might help them.

And this is a positive thing because it's a huge step towards building greater financial literacy in this country.

But every generation Millennials, gen Z boomers, they can still fall into debt traps when a financial product feels easy and accessible.

But the difference now is that by now pay letter is so like frictionless, you could say in that it can sneak up on you and so much faster than a credit card can.

So how do you use by now pay letter responsibly or how do you decide if it's worth using at all?

So this is what I recommend you do.

Number one is you always track your payments.

So if you decide to use buy now Pay Later, make sure those repayments are in your phone as with a calendar note in an alert system to remind you that that's coming out of your account in a couple of days and put them into your budget so that you are completely on top of those repayments and you never default.

The second thing I'd recommend you do is have a buy now Pay Later repayment account so you could look at transferring the money for your payments as soon as you make that purchase, and just so you know you can actually pay it off earlier if you wish, which is something I highly recommend.

The next thing I would recommend so that you never I guess watch buy now pay later spiral of control, and that is to limit yourself to just one buy now, pay later provider.

The problem when you've got say Klana, you've got after Pay, you've got even PayPal now.

Off of this, when you I've got multiple different providers, you have multiple headaches.

You're juggling way more balls in the air.

So just stick to one.

And also it means when you're checking, for example after Pay, you can see, okay, well I've got these repayments going.

It's one quick, easy way to check rather than having to check say five different apps.

Then for using buy now pay later for planned purchases only, so don't ever use it for an impulse purchase.

You know, if you're thinking, Okay, there's one.

Particular item I would like to buy for myself, and I'm going to reward myself without because I've achieved this goal already and I'm going to help pay for that item.

I'm going to pay for it off over, you know, the six installments or eight installments, depending on who you're using.

Just do it planet, do your research, make sure you're buying in a smart, savvy way.

Don't do this impulse thing.

Oh just put it on buy now Pay Later.

And then, finally, if you're ever struggling with buy now, Pay Later, pick up the phone and ask for something called ship support, which you can get where you can get a repayment plan put in place and help avoid all of those late fees and credit damage.

It is so important that you talk to human, explain your situation and get this problem fixed for good now.

I as promised I said, I would share with you my five golden rules for buy now Pay Later, because occasionally I do like to use this myself.

What I would say is number one is I would never buy something on buy now pay letter if I wasn't prepared to pay for it in cash.

So I won't just buy it because it's an option to pay for it and buy buy now pay letter.

I'll buy it because I love values and appreciate it.

There's that huge mindfulness as to the value with the actual purchase.

I would never also use buy now pay letter for essentials.

I would never use it to pay for groceries.

I'd never use it to pay for my utilities or rent or anything that was an essential.

Then, of course I would always cap buy now spending ideally with my fine you're planning cap on, I'd say zero.

You shouldn't be using it at all.

But I understand that some people do use this in a smart way.

So if you're finding that you are spending more than say, five to ten percent of your after tax salary on by now pay later, that is a red flag to simply stop.

That means you're actually not managing your budget correctly.

You're using this as a band aid, and the band aid is about to come off and expose a deep, infected, nasty wound that needs urgent medical attention.

Don't let it be that become like that.

And then, of course, never stack your purchases you would be a fool to have multiple buy now pay later payment's going.

As I said, you were just juggling additional balls in the air.

You're creating additional headaches for yourself.

If you're someone who likes buy nowpa Lata has emergency money, is good at managing their cashflow, but just likes it and doesn't have a credit card.

Only ever, have one repayment going at one time.

Don't have you know, five different after pay or five different climbs or five different paypals or whoever you know you want to use as your provider.

Just have one going a time, and do not purchase anything until that particular purchase that you've previously made has been paid off in full, and in fact, have some breathing time and learn to also enjoy using cash as well, and then finally have an exit plan.

Buy now, pay Later is a short term payment tool.

It is most definitely not a long term lifestyle.

Use it to your financial advantage.

If it's not working, kick it now.

As I said, by now pay later can definitely be convenient for some, and it may even be helpful for some, but only when you are in complete control.

But just like credit cards, it can also work against you if you're not intentional about how you use it.

So gen Z, if you're listening right now, please know I applaud you for questioning the credit card system and for looking for alternatives.

But remember, it's not the product that decides your financial future, it's actually how you use it.

So if you want.

Financial freedom, focus on building habits that's support it.

The budgeting, the saving, the investing, and of course staying on top of all of your debts no matter what type of debt you have in your life.

That is actually how you protect your financial future and make sure it is growing to something that is powerful and you're doing it in a productive way.

And of course you have your options and your eyes wide open.

So whether it's credit cards or buy now, Pay Later, or any other financial tool, the rule is always going to be the same.

You stay in control, not the other way around.

So if you found today's episode it's helpful, please can you do me a huge favor and send it right now to any of your friends that use by now, Pay Later, or even better, share it on your socials and tag me, because you never know who might need to hear this advice about buy now, pay later right now, And in fact, a lot of people are really hiding behind these dark secrets of multiple repayment, back to back repayments and damaging their credit score.

So just by sharing this and sending this, you're going to be helping a lot of people, whether you realize it or not.

And of course, thank you so much for everyone for listening to today's episode.

It's been a delight and a pleasure and an honor to tune in with you this morning.

Enjoy the rest of your week, and I'll catch you this Friday at five am for start here, and don't forget you can always send through your questions to me to pick my brain and to help you get started.

All right, everyone, have a fantastic week.

Speak to you soon.