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If you love buying stuff on interest free payment plans, you’re not alone. The popularity of interest-free payment options like Afterpay, Openpay, Devizo and ZipPay has exploded in Australia over the last year.

The trend is set to grow, with major retailers adding in-store payment options to draw in even more shoppers. Afterpay is the fastest growing of them all and has thousands of retailers on its list, including the big department stores.

On the face of it, Afterpay is simple. There is a quick credit check processed to pre-qualify you to use the service, but from then on, you can generally count on instant approval. Like credit cards or layby, it lets you buy something without having to take the time to save up for it. Or it allows you to smooth out the payments if you can technically afford something, but only just. Unlike credit cards, you don’t have to pay a fee for the privilege. That is, unless you break the rules or fall behind in repayments.

If you want to avoid being caught out and paying more on something that was supposed to be interest free, it helps to know where these payment companies make their money. One common way is late fees, which are often flat rates. The up side of this is that they’re predictable; you don’t have to calculate any percentages. The down side is that they can be way worse than the interest you would have paid on the amount you purchased. For example, you purchase something for $20 on Afterpay and your late fees are $10 per skipped payment. Say you forgot to put money in your account to cover the direct debit when it was due and you incurred a late fee. That’s pretty much the same as 50% interest!

It’s also worth thinking about which account you nominate for your direct debited repayments. If you’re using a normal debit account with an overdraft, make sure you’ve got enough in your account to cover the payment. If you go in to overdraft territory, you’ll start incurring interest. It’s also worth checking whether your normal account charges a flat fee for overdrawing for single direct debits. Fees of this nature can run you up to $10-$20 per transaction, while dishonour fees can also catch you out. Dishonour fees are the fee (usually a few dollars) that the bank charges for rejecting the direct debit request.

Finally, it’s worth remembering that prevention is better than cure. In other words, don’t put things on a payment plan if you don’t need them in the first place. Impulse shopping is hard to curb because, psychologically, it just feels so good. Try your hardest to avoid large purchases for at least 24 hours after discovering the item. If you’re in a store, leave and don’t come back until the next trading day at least. With online shopping, bookmark item pages or add them to your wish list, and then close the page.

If you’re already in debt with or without Afterpay, and you’re struggling to manage the repayments, remember you have options. There are plenty of websites set up to help you plan your budget, such as ASIC’s MoneySmart website. With the silly season coming fast, it might be worth planning your spending now so you’re not caught out later.

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