Australians turning to buy now, pay later schemes for groceries ‘stuck in a revolving door’ of debt

When Brooke Haebich and her partner had their first child they struggled to afford groceries, but initially they thought they had found a lifeline in Afterpay.

They began buying $200 gift cards for Woolworths or Coles on the buy now, pay later scheme, and would then pay off the amount in four fortnightly instalments of $50. But after a while, paying for essentials by going into debt was like being stuck in a revolving door, Haebich says.

"It's a life saver in that moment," she says from her home in Wangaratta. "But then your pay starts going towards repaying what you've spent, so then the cycle begins; you haven't got enough money to get groceries, so you use Afterpay again to get another card."

Financial counsellors say more and more people have turned to BNPL services to afford essentials such as food, petrol, and bills since petrol prices suddenly shot up in February. They expect the numbers to climb further as cost of living pressures bite.

Claire Tacon, a financial counsellor at the Consumer Action Law Centre, says an increasing number of people calling the National Debt Helpline have been sucked into a debt spiral after turning to BNPL, leaving them in a worse financial position than before they began using the scheme.

"Payments for these accounts are always direct debited so the company gets the money first, then people don't have enough to feed themselves and look after their health, so they just keep reborrowing," she says.

Haebich says at times she and her partner had two or three different Afterpay instalments direct debited from their account to pay for various grocery gift cards. This ate into their fortnightly budget, causing them to run late on rent and bills.