Two things to consider before using buy now, pay later services to stock up for Christmas

Before using buy now, pay later services to stock up this festive season, shoppers are advised to consider whether they need the item now, and if so, whether they could save up next time.

It comes as Kmart is the latest retailer to offer the buy now, pay later service Afterpay, in 25 stores across the country.

In a statement released by Kmart and Afterpay on Tuesday, Kmart general manager of stores Chris Renshaw said introducing Afterpay into stores meant customers could have more access to its products, whilst "managing their budgets" for Christmas.

Having offered Afterpay to online shoppers, bringing the service into Kmart stores would give New Zealand customers "even more shopping convenience". Customers could use the service at Kmart checkouts, via the phone app.

Afterpay allows shoppers to buy goods without paying for them upfront. Payments are spread over four, fortnightly instalments (an initial payment may be required at the time of purchase).

Talking to Newshub about buy now, pay later services, Ayesha Scott, senior lecturer - finance at AUT said as with a credit card, not using their own money to pay for things upfront can be convenient for shoppers. 

But there's a risk they overspend - and the consequences for families already facing hardship or low incomes can be severe, she said.

Before using buy now, pay later services, shoppers could consider the following two questions.

Do I really need the item now?

With nine days to Christmas, it is tempting to use buy now, pay later services to stock up on Christmas gifts and other items before the money is available.

But Scott suggests shoppers ask themselves if the purchase can wait until they've saved the full cost upfront.

"Often, when we pause, we realise we don't need the thing right now or were perhaps using that spending to give us a boost in the moment," she says.

Could I save up next time? 

If income is expected over the coming days, or money is not currently accessible, using buy now, pay later services can be convenient.

Before using the service, shoppers are urged to think about why they're using it, and their means to pay the full cost back over the coming weeks.

"Each individual repayment doesn't seem much, but added up, especially when people buy more than one item, those repayments can break the budget," Scott said.

"A little extra planning next time will set you up for a healthy budget in the future."

According to Afterpay's terms of service, no interest or fees apply if payments are made on time. A $10 fee applies if payments aren't made on or before the due date. A further $7 fee is charged if payment isn't made within seven days.

Late fees are capped to a maximum total of $68 or 25 percent of the purchase price, whichever is less.

Just like with any bill, being late, or defaulting on payments can affect peoples' ability to borrow money in the future.