Call for more credit checks as rising cost of living forces families to use 'buy now, pay later' schemes for essentials

The skyrocketing cost of living is seeing more struggling families turn to 'buy now, pay later' schemes to put food on the table.

What was traditionally used for buying big-ticket items like a laptop or a couch is now being used for everyday essentials like milk, bread, meat and medicine. 

'Buy now, pay later' - a scheme that is a new poverty trap. It offers easy-access cash, allowing consumers to side-step credit cards and payday loans.

"Clothes for the kids, for ourselves. Our wedding. We paid our wedding off using it. We use it for a lot of things," one user told Newshub.

But more and more people are using the schemes to buy essentials like meat and bread because they can't afford to pay upfront.

"So I use it at The Warehouse, just to get like half my groceries. Like sugar, flour, milk. Stuff like that," another said.

Perhaps no surprise with grocery prices up another 10 percent last month according to the latest Infometrics-Foodstuffs Groceries Cost Index.

"Sixth or seventh consecutive month that we've seen those double-digit increases coming forward," said Infometrics CEO Brad Olsen.

Services like Afterpay, LayBuy and Zip Pay offer interest-free repayments with late fees if a payment is missed. Consumer NZ says one in five users are getting into debt.

"We can completely understand why people would do it if they really need to pay for those essentials and they can't quite get the funds in their account to make that happen," said head of research and advocacy Gemma Rasmussen.

However, the debt can easily get out of control.

"The penalties can be really quick so it can happen within a month where you are having a late payment fee, and if you continue to miss payments things can spiral really quickly," Rasmussen warned.

The Government is set to release new regulations for buy now, pay later loans, giving borrowers greater protection from unreasonable default fees under the Credit Contracts and Consumer Finance Act.

Consumer NZ said it doesn't go far enough and wants to see more credit checks.

"We think there needs to be a broader, lighter, affordability assessment in place," Rasmussen said.

To protect more Kiwis from buying now and regretting later.