Cost of living hits Buy Now Pay Later spending this Mother’s Day

While Australians traditionally go all-out splurging on gifts for Mum each Mother’s Day, this year we’ve had to tighten our belts, according to data from one of Australia’s Buy Now Pay Later (BNPL) providers.

According to Zip Pay, its users dropped over $7 million on gifts for Mum in 2022, with almost three quarters (73%) of these gifts being bought in-store. However, this year Zip users only spent around $4.84 million on Mother’s Day gifts; perhaps as a reflection of the current cost of living crisis.

In 2022, the biggest categories for Mother’s Day spending were clothing, followed by department stores, jewellery, cosmetics & toiletries and beauty salons. But this year Australians bought less jewellery for Mum, with clothing as the top spending category, followed by department stores, cosmetics & toiletries, jewellery, then beauty salons.

In the lead-up to Mother’s Day 2023, Zip chief customer officer, Steven Brennen, said that in recent years, there had been a clear trend towards experiential gifts, such as events and entertainment, and self-care for Mother's Day. But while spending was initially expected to skyrocket, with the Australian Retailers Association (ARA) forecasting a total spend of $925 million, it now seems Australians have seriously cut back on celebratory spending.

The news comes at a time where rising interest rates mean that an Australian on an average wage is putting an estimated 71% of their take-home pay on their mortgage, leaving them with just $57 a day to cover all of their other household costs.

RateCity research director, Sally Tindall, said that financial stress isn’t just affecting low-income households, and that “some Australians who earn too much to qualify for many of the government concessions are well and truly up against the ropes.”

Australians looking to manage their household expenses have a range of options to consider, including refinancing loans, switching utility providers, and selling big-ticket items, though going into credit card debt to plug the holes in your budget could put you at risk of increasing your budget stress. 

While BNPL services don’t affect your credit score in the same way as credit cards, they can still affect your financial health if you’re not careful. Missing BNPL payments can lead to late fees, and missing paying these late fees could mean your debts end up appearing on your credit report and affecting your credit score.

Additionally, the government has decided to amend the National Consumer Credit Protection Act to include BNPL companies as credit providers. This could mean that BNPL companies will soon be bound by the same rules and regulations as other credit providers, such as holding Australian Credit Licenses and carrying out credit checks on prospective customers to determine their suitability for a credit product.

When any credit provider runs a credit check on you, it gets recorded as a hard enquiry on your credit file. While a single hard enquiry will not affect your credit score as such, having multiple such enquiries listed on your file in a short timespan could make you appear hungry for credit, which could be a red flag for potential lenders.

Australians at risk of serious financial hardship have options to consider, such as contacting their bank about being put into a hardship program, or contacting the National Debt Helpline for financial counselling. 

Compare savings accounts