NZ debt is rising, and buy now, pay later services like Afterpay are becoming a bigger part of the conversation. What started as a convenient alternative to credit cards has quietly changed the way many Kiwis think about spending, borrowing and debt.
Why Buy Now, Pay Later Doesn't Feel Like Debt
One of the reasons Afterpay has grown so quickly is because it doesn’t feel like borrowing money.
Instead of paying $300 today, shoppers are asked whether they can afford four repayments of $75. It’s the same purchase, but psychologically it feels much smaller.
Mike says that’s where the danger begins. The product arrives immediately, giving people the reward before they’ve actually paid for it. Combined with how simple it is to set up an account and complete a purchase, it becomes incredibly easy to spend money that hasn’t really been earned yet.
James points out that almost a quarter of users admit they spend more because of buy now, pay later services. That’s an important distinction. The issue isn’t simply that people have access to another payment option – it’s that the payment option itself is encouraging additional spending.
NZ Debt Is Rising Because Small Payments Become Big Problems
Most people don’t wake up intending to fall into debt.
As James explains, it usually starts with a single purchase that feels manageable. One repayment becomes another, then another purchase is added before the first has been cleared. Eventually, several small repayments begin competing for the same weekly income.
Mike draws on his experience as a former banker to explain why this becomes so difficult to escape.
If someone already can’t cover their living expenses with their current income, adding another repayment doesn’t solve the problem – it simply shifts it into the future. When next week’s pay arrives, there’s now even less money available because some of it has already been committed to yesterday’s purchases.
Without extra income, a tax refund or another unexpected windfall, that cycle can continue for weeks or even months. Each repayment reduces the money available for groceries, rent, fuel and other essentials, making it increasingly difficult to catch up.
The Bigger Issue Isn't Afterpay: It's Financial Pressure
James notes that buy now, pay later services are increasingly being used for groceries, fuel and household bills rather than discretionary purchases.
For Mike, that signals a much bigger issue than Afterpay itself.
When people rely on short-term lending to get through the week, the underlying problem isn’t necessarily the payment platform. It’s that rising living costs have left some households without enough income to comfortably meet their essential expenses.
That doesn’t mean every Afterpay purchase is unavoidable.
Mike makes a clear distinction between using short-term debt for necessities and using it for discretionary spending. While financial pressure may explain why some people borrow for essentials, he believes unnecessary purchases are where many debt problems begin.
When borrowing becomes normal for buying clothes, shoes or other non-essential items, it’s easy to underestimate how quickly those repayments accumulate.
Interest-Free Doesn't Mean Risk-Free
One of Afterpay’s biggest selling points is that it doesn’t charge traditional interest.
That can make it appear safer than a credit card.
However, James and Mike argue that focusing on interest misses the bigger picture. The real cost isn’t always the fees it’s the spending behaviour the platform encourages.
Receiving the product immediately removes the natural pause that comes with saving first. Mike compares this with the old layby model, where customers only received the item after making every repayment. While neither approach is perfect, he believes saving before spending creates far healthier financial habits than spending before paying.
Short-Term Debt Can Have Long-Term Consequences
Many people don’t realise that buy now, pay later facilities can affect much bigger financial goals.
James notes that lenders may interpret frequent Afterpay use as a sign of financial stress or poor cashflow management.
Working in mortgage advice, Mike says it’s something they regularly see during lending assessments. While every application is different, a pattern of relying on short-term debt contributes to the overall picture of a person’s financial position.
For anyone planning to buy their first home or apply for finance in the future, developing strong cashflow habits today can become just as important as building a deposit.
Getting Out Of The Debt Cycle
There isn’t a quick fix once short-term debt starts to build.
Mike says the first step is sitting down and creating a realistic budget to understand exactly where money is going and what repayments are genuinely affordable.
In some situations, consolidating several small debts into one personal loan may provide a clearer repayment plan. However, Mike stresses that this only works if the existing buy now, pay later accounts are closed. Consolidating debt while continuing to use the same facilities simply creates an even bigger problem further down the track.
Key Takeaways
- Buy now, pay later changes how people think about spending by making larger purchases feel smaller.
- Small repayments can quickly build into a debt cycle that’s difficult to escape.
- Rising living costs are pushing more people to rely on short-term debt for everyday essentials.
- Interest-free doesn’t mean risk-free if spending habits become harder to control.
- Frequent use of buy now, pay later services may influence how lenders view your overall financial position.
- Creating a realistic budget and addressing debt early can make it easier to regain financial control.
Next Steps
If you’d like help reviewing your cashflow, budgeting or lending position, the Lighthouse Financial team can work with you to build a personalised strategy that supports your long-term financial goals.
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