Best ways to pay for something you can't afford

Say you don’t have the cash on hand for something you want to buy – does that mean you can’t afford it? Let’s look at some of your options.

Things like a debit card linked to your account, contactless payment or online payment are all ways of paying money that you already have. What we’re talking about here is when you don’t already have the money to finance a purchase. These include:

• Credit cards
• Gift cards and vouchers
• Lay-by
• Afterpay and zipPay
• PayPal

Credit cards

Credit cards allow you to buy something on the spot, whether or not you have the cash to pay for it. To obtain a credit card you must fill out an application with your bank or financial institution.

Credit cards certainly make purchasing easier. However, you need to remember that you are still spending money when you use your card, and will have to pay the bill when it arrives. If you don’t pay the full amount by the due date, then you will be charged interest – meaning it’s easy to end up owing more than you intended.

Gift cards and vouchers

Gift cards, vouchers and store cards all basically serve the same function. You use them like a pre-paid credit card. Money is pre-loaded on the card and it can be used until all the money is spent. The difference between these sorts of cards and pre-paid credit cards is that they can only be spent at the store they were issued at.

Lay-by

A lay-by agreement is one that allows you to you buy something and pay for it in several instalments before taking it home. You won’t be allowed to take it home until it is completely paid for. You’ll usually pay 10-20 per cent as a deposit (and any deposit you pay is an instalment). You must get a copy of your written lay-by agreement that states all terms and conditions, including any termination fees that may apply.

Lay-by can be a useful way of spreading payment of purchases over a longer period, to help your budget cope. However, there are drawbacks to consider, like:

• Large department stores often charge service fees (although many smaller retailers might not)
• Large department stores may also keep your deposit (up to 20 per cent) and the service charge if you cancel your lay-by
• Your lay-by is always locked in at the original price for the product, so if it later goes on sale, you miss out on the lower price
• If the store goes into receivership before you’ve finalised the lay-by, you will probably have lost the item and you may become an unsecured creditor, meaning you become the last in line to get your money back

Remember these tips to helps protect your rights:

• Before you sign the agreement and pay any deposit, make sure you read and agree with the terms and conditions, including payment dates, amounts and any extra charges you’ll have to pay if you decide to cancel
• Keep copies of the agreement and receipts for the deposit and all instalments, so you’re covered if there is a problem later

Afterpay and zipPay

Afterpay is a system similar to lay-by. It offers online shoppers a simple instalment plan, allowing them to pay for purchases in four equal instalments, which are due every fortnight. When you shop from a store in Afterpay’s online Shop Directory, you then choose Afterpay as your payment method at checkout (like PayPal). First-time customers must provide payment details to set up an account.

After you check out, the goods will be shipped to you by the seller. You can log in to your Afterpay account to see your payment schedule, and/or make a payment before the due date. Otherwise, the instalments will automatically be deducted from your debit or credit card every fortnight.

There is no fee to you when you’re purchasing. The only fees applied are late fees if your scheduled payments are unsuccessfully processed and you fail to make your payment via a different method. 

zipPay is basically identical, except that you can pay weekly, fortnightly or monthly, giving you more flexibility than the fortnightly system used by Afterpay.

PayPal

PayPal pays the seller on your behalf when you purchase, and then retrieves the money from you. You will be required to link a credit card or bank account to PayPal when you create you first create your account.

If you have enough money in your PayPal or linked bank account to cover a purchase, then it will simply be deducted. If you don’t, PayPal will make two attempts to complete the transaction from your bank account before switching to your backup funding source.

Your bank may charge you fees for each failed attempt, so you should immediately add sufficient funds to your bank account so that the payment is successful on the first attempt.

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