Kiwis’ private debt climbing as a result of spend on necessities

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People’s personal debt is rising as they spend more on essentials, says Consumer NZ.

To understand how people are faring with the rising cost of living, the organization looked at debt overall – buy now pay later (BNPL), services, credit cards and overdrafts.

Consumer NZ told Breakfast that 28% of people with personal debt say they bear most of it on essential expenses. This is a 5% creep from last year.

The organization also found that one in five Kiwis has a BNPL account and one in four transfers those purchases to a credit card.

READ MORE: Buy now, pay later users are struggling as the economy picks up

Consumer NZ also found that one in ten New Zealanders lives beyond their means.

People primarily use a credit card for essential expenses like bills, groceries and fuel, the organization said. This trumps unexpected expenses.

BNPL services include Afterpay, Humm, Laybuy, Genoapay and Zip. Vendors offer short-term, interest-free loans that people can use to buy anything from groceries to clothing to electronics.

While borrowers pay no interest when things go according to plan, arrears interest is added if payments are missed.

Consumer NZ’s Gemma Rasmussen said the results show many people are struggling to make ends meet.

She also said that 40% of people say they have no savings or are “deeply concerned” about how much savings they have in the bank.

Because the BNPL services are unregulated, Rasmussen continued to call for them to be regulated under the Credit Contract and Consumer Finance Act (CCCFA).

The government is currently considering whether to regulate BNPL services, but some lending rules under the CCCFA are being relaxed.

Updated regulations and a new code for responsible lending go into effect Thursday.