Buy now pay later: How women are getting caught in debt traps

Each quarter, as part of our Sentiment Tracker survey, Consumer NZ asks questions about personal debt and BNPL services.

Our survey found women disproportionately have more BNPL debt than men. Just 15% of men who had personal debt reported having BNPL debt, but over 30% of women said the same.

We’ve used our data to create profiles of the women who answered our questions. These women’s debts, financial positions, ages, locations and the reasons they use BNPL services are all real – we've just given them names.

BNPL is the cherry on top of Helen’s mountain of debt.

Helen’s 53 and has a full-time job. She’s paid off her student loan, but she’s got lots of other debt. On top of BNPL debt, she’s got finance owing on a car and a credit card, and she’s also paying off a hire-purchase agreement.

Not only that but she’s got a personal loan, a loan from her family and an overdraft on her bank account. She uses her credit card to pay for her BNPL purchases.

Most of her debt is for essentials like groceries, bills, and fuel. She feels like she needs credit to get by. She has no long-term financial goals but knows she’s living beyond her means.

Helen doesn’t think she’ll be able to manage for much longer.

Meg uses BNPL for medical bills.

Meg, 67, is a retiree in the Bay of Plenty.

Meg has personal debt, a BNPL account and a store card (a credit card that can only be used in certain shops). She pays off her BNPL debt with a debit card, so it’s all her money. But Meg says it’s medical expenses that she’s using BNPL to cover.

She doesn’t set any long-term financial goals, but she’s constantly aware of how much money she’s spending. Meg knows she isn’t living within her means, but she’s unsure who she can go to for support.

Access to credit like BNPL is a necessity for Meg. Maybe that’s why she thinks her personal debt levels are manageable.

Pia uses BNPL to buy Christmas presents for her kids.

Pia, 29, lives in the Bay of Plenty with her children. She’d rather not share what she does for work, but she doesn’t have a student loan. She’s got a BNPL account and some dental debt she owes to Work and Income New Zealand.

She only uses BNPL to buy her kids Christmas and birthday presents. The instalments make it easier to pay off this time of year.

Pia thinks access to credit is a necessity, not only to cover emergency costs like her dental treatment, but for everyday life. But if she ever missed a payment or incurred fees she couldn’t cover, she wouldn’t know who to ask for help.

She’s always reviewing her financial position, and even though Pia thinks her personal debt level is manageable, she still finds it difficult to meet her financial obligations.

Sophie has a credit card to pay BNPL late fees.

Sophie is 22 and lives in Auckland with her partner and her young child. She works part-time and doesn’t think much about her financial position. She doesn’t review it regularly and setting long-term financial goals isn’t something she does often. Sophie doesn’t have a student loan.

She does have personal debt, though. At first, it was just a BNPL account so she could buy a few luxuries. She used a credit card to pay for her BNPL purchases.

Soon, fees started adding up. It turns out that BNPL is just the beginning of Sophie’s potential debt spiral.

Most of her debt now is made up of late fees from BNPL. A credit card also racks up interest alongside late payment fees. Sophie finds it difficult to meet her financial commitments, and she isn’t sure if her debt level is manageable. Despite this, she thinks she’s still living within her means financially.

More BNPL protections are needed

We know BNPL can be an attractive alternative to traditional credit and an alternative way to “budget”, but BNPL debt can quickly accumulate and become unaffordable, leading to debt spirals.

The way BNPL is marketed online doesn't make it look like a traditional banking product, like a credit card, but as a gateway to purchasing a wide range of alluring products.

With platforms like Afterpay offering “all the best deals” and bespoke discount programs, it's little wonder many shoppers are tempted to extend beyond their means.

Currently, the Credit Contracts and Consumer Finance Act (CCCFA) does not apply to BNPL. However, the CCCFA will soon be amended to provide greater protections for people using the payment platform.

We don’t think the current laws go far enough to protect consumers, particularly more vulnerable New Zealanders who may use BNPL to bridge financial gaps but end up in deeper debt.

Where to get help with finances and debt

• Sorted is a free service helping New Zealanders get ahead financially.

• FinCap is an organisation that supports free financial mentoring services.

• Money Talks is a free service helping New Zealanders with day-to-day money matters like budgeting and debt management, as well as guiding people through Work and Income processes.

• Insurance and Financial Services Ombudsman is a free service that resolves complaints about insurance and financial services.