CAREER + MONEY

SHOULD GEN-Z TRY PAY LATER PAYMENT SCHEME?

What are the pros and cons of using pay later?

29.06.2021
BY HANUM FAUZIA
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Buy now, pay later is predicted to be booming in Indonesia. Experts estimated that the number of users would grow significantly this year. Indonesia potentially was being eagle-eyed by investors seeing the significant growth of the digital economy in Indonesia. It innovated technology in this industry, like a fast credit score system and guaranteed risk management. 

The implementation of pay later in Indonesia is quite different compared to developed countries. Pay later becomes the first option even though they have a credit card. However, the fast-growing e-commerce and digital transaction and the low penetration of credit cards in Indonesia make pay later become a big chance to grow here. 

So how good are they and should you make use of them?

The first advantage of these services is that you can take home your purchases and pay them off over time. Quickly set up an account, use it straight away, compared with the time it takes to apply for other credit types.

Photo courtesy of rupixen.com 

Pay later services are fully integrated with a store’s checkout systems as with credit cards and debit cards. So it is just as easy to use this service. As long as you make your repayments on time, there are no fees or interest to pay. The payments are automatically deducted from your nominated account.

Pay later transactions are fast because they may approve in less than a day. The best thing is that, unlike credit card applications, buy now, pay later providers don’t do credit checks before approval. Providers will ask for some information, including the account from which they will deduct your payments.

Pay later providers don’t charge any interest on the amount you borrow–only fees for when your payment is late. This may happen if, for instance, you didn’t have enough money in your transaction account during the scheduled auto charge or by the due date.

Disadvantages of pay later

It may be convenient for many, but they also present some disadvantages when irresponsibly used. As mentioned above, the initial advantage of these services allows you to defer payments, but so do credit cards. The difference between buy now, pay later service, and credit is that credit cards are regulated under Financial Services Authority (OJK), where providers must comply with this act.

Photo courtesy of Clay Banks

Pay later services covered by this act don’t need to inquire about your financial situation to ensure that you can afford the repayments. You might consider this an advantage, but in reality, borrowing more than you can afford to repay comfortably is a distinct disadvantage of buy now pay later services.

Also, since most credit cards charge interest on purchases, an interest-free service, such as afterpay, can be very seductive. An interest-free option is an excellent financial move, but not if it encourages you to make impulse purchases that you can’t afford. The money you borrow may not incur interest, but you may be charged a high late payment fee if you don’t pay on time. 

If you don’t have enough money in your elected transaction account because it’s still a few days from your payday, expect to pay a late payment fee for each day of delay.