Say you’re shopping online and you see a great deal in a sale. Maybe it’s clothes, groceries you could buy in bulk, furniture – but you don’t have the money. Maybe you’re a parent and your child needs a laptop for the new school year but you can’t afford it so soon after Christmas.

You’d do layby except you need the stuff now. A credit card or store loan are options, but what about the interest?

Enter buy now, pay later: a rising breed of microfinancing products – from brands including Afterpay, Zip and more – that allow shoppers to take the item for a portion of the price and pay the rest off in interest-free instalments. Pay on time, and there is no extra cost – the vendor pays for the service.

The popularity of this payment option – available in stores and built into shopping websites -is skyrocketing.

There are growing fears, however, that some shoppers are using the services to impulse buy things they may not need, with “no idea” how they will pay later, leaving them with multiple debts or pinged by late payment fees.

Concerns of consumer harm have led the Government to launch a review.

But to consumers such as Kaysi Fredericks, buy now, pay later providers have been a “game-changer” for her business and family.

”We could have up to 15 going at once … I buy things in bulk like laundry liquid powder. I have five kids and two adults in the family and this way I can get all the stuff they need.”

She said it was the “best thing we ever did”.

”Birthdays, Christmas we use it too – and for those things that are bigger – my son needed a laptop for school this year so was easier to pay it off over the six weeks instead of coming up with the whole amount at once.”

Beneficiary Shona Tahau was also a fan.

”We use it to buy meat at the Mad Butcher … last weekend Igot a king-size duvet cover for $19 and a cast iron wok/frypan for $29.”

She said she and her husband, who would love to work but could not due to sickness, kept a tight watch on their use of delayed payment options and only had “one or two” going at once.

”When it’s time to get our car a warrant we will use it.”

Both Fredericks and Tahau said they used multiple providers.

Tauranga Budget Advisory Service manager Shirley McCombe said buy now, pay later schemes could be useful if people had reliable, regular income and were disciplined.

However, some people committed without having any idea how they would pay.

The service had noticed a rising trend of clients having multiple after-pay arrangements with different companies.

”People don’t have to save anymore, if they want it, they buy it. Credit cards, pay-day loans, Afterpay etc.

”This doesn’t help when it comes to saving for your future or for a home.

”People struggle to control that need for immediate gratification and there is a tendency to impulse buy.If you have to wait and save for something, you often decide you don’t really need it.”

A client once said he knew he needed to change: ”He was buying what he wanted but begging for what he needed.”

She said education was “essential” but she also believed more regulation was needed.

“Otherwise we just allow people to move from one unhealthy relationship (ie with high-cost loans) to another (ie with Afterpay).

“It is always the most vulnerable that we need to consider and protect.”

Rotorua Budget Advisory Service manager Pakanui Tuhura agreed the purchase systems weren’t too bad if the rules were followed because buyers were not charged interest if they met the payments.

But he believed the schemes should be brought under the Credit and Contracts Act and designated as Lenders giving the public a safer purchasing mechanism.

Multiple payments could also mean not enough money left to cover accommodation, food, power, other debts, and living costs.

Sorted website lead said a recent report suggested buy now, pay later had grown by 57 per cent and continued to increase in popularity.

She said it was important to have a diverse range of financial products because they provided different solutions to people with different needs.

But when those products began to cause harm, intended or otherwise, it was important appropriate controls were put in place, she said.

Tauranga Chamber of Commerce chief executive Matt Cowley said pay later schemes were great for customers who know how they work.

The schemes also helped businesses make sales that would have otherwise been abandoned by people who didn’t have enough cash on them.

”Their fees to businesses can be more expensive than say, credit card payments. Hopefully, the Government’s new regulation of merchant fees charged to businesses covers all types of micro-financing, including pay later schemes.”

A Ministry of Business, Innovation and Employment spokesman said community support providers and budgeting organisations raised concerns that buy now, pay later products could contribute to consumer harm.

”We are working to understand the extent and nature of the consumer harms caused by these products.”

While the products had many features of consumer credit contracts, they fell outside the strict definition in the ​​Credit Contracts and Consumer Finance Act because they did not charge interest, fees or take a security interest over goods, he said.

The ministry’s 2018 Review of Consumer Credit found little evidence of harm. But it hasnow been asked to provide advice on the root causes of any consumer harm from delayed payment products and how to address it.

”We are working with buy now, pay later providers and consumer advocacy organisations to understand the issues.”

An Afterpay spokeswoman said its top 10 per cent of Australia and New Zealand customers used Afterpay more than 60 times a year.

It had more than 3.5 million customers with an average order value of about $150 and average outstanding balance of $218.

She said Afterpay helped customers spend responsibly and there was a financial hardship policy in place.

”We take a lot of steps to help ensure this, including pausing accounts when payments are missed.

“Afterpay starts customers on very low spending limits, we require customers to make their first instalment payment upfront and we don’t approve 100 per cent of orders.”

Afterpay launched in New Zealand in September 2017 and has become available at many retailers nationwide.

She said the service empowered customers to “access the things they want and need, while still allowing them to maintain financial wellness and control by splitting payments in four, for both online and in-store purchases”.

Concerns have also been raised about delayed payment schemes in the United States and there have been calls for tighter regulation in Australia.

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