- Almost one in five Australians are now holding a buy now, pay later debt, up from one in ten last year.
- The growth comes at the expense of credit cards, which have been in steep decline.
- It comes as the average Australian debt grows by more than $12,000 in 2020, according to Canstar.
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Much has been made of Australians getting their house in order throughout the country’s short-lived recession – but there’s at least one form of debt they’re not swearing off.
Throughout 2020, buy now, pay later debts almost doubled, according to Canstar’s annual consumer pulse report, as the sector continues expanding too fast for old-fashioned regulation to catch it.
The trend, struck upon by Canstar’s 2000-person survey, highlights the changing nature of the credit sector, according to financial services group executive Steve Mickenbecker.
“The majority of people who are battling debt have it tied up in credit cards, which is down to 56% from 67% in 2019. At the same time the portion of people with credit card debt is down we’ve also seen the number of people with a buy now, pay later debt increase to 18%, up from 10% in 2019,” he said.
“This may continue to increase in years to come with 47% of Australian adults indicating they would consider using a buy now, pay later service.”
The growing prevalence of services like Afterpay and Zip, which didn’t so much as exist eight years ago, has been one of the most visible financial trends of recent years. It now ranks amongst car loans and personal loans as the most common debt instruments.
However, they are not the only ways Australians are spending beyond their means, with the average debt coming in at $30,188. About $12,000 of that on average was racked up this year alone.
That’s despite recessionary fears sending savings higher, and collecting in rainy day funds. The median savings total is only slight higher than the debt accumulated this year, at around $15,000.
While almost half of all Australians are saving more than they were last year, just 15% actually paid down their debt in 2020.
As living pressures grow, it’s clear there’s a contingent of Australians who are in a precarious position.
“The number one expense Australian savers are working towards currently is living costs, which was third in the priority list last year and shows many Australians are saving to get by right now. This is a trend that will shape 2021,” Mickenbecker said.
“More than ever before we are seeing a clear divide between those who are doing well by adding to their savings and those struggling who are stacking on the debt. But even those who can save look to be motivated by concern about what might happen next.”
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