Afterpay makes it easier for us to spend and that's not good

Are we over credit cards? Latest statistics from the Reserve Bank suggest there is certainly some loss of appetite.

Both July and August figures show total balances outstanding remain at $51.3 billion, down from $52.3 billion in May and June. Balances accruing interest remained at $31.4 billion.

It could just be a temporary lull or it could mean that consumers are looking elsewhere for their quick credit fix.

Peter Gray, co-founder and chief operating officer at zipMoney, the company behind zipPay virtual wallets, believes Australia may be reaching what he calls "peak credit card".

"Alternate payment solutions are gaining momentum," he says. "Peak credit card is the point at which maximum credit card usage is reached and we just may be nearing that."

He says banks aren't doing a good job at attracting millennials, who are looking for easier ways to transact.

"There are better ways to saving and transacting, and it's not necessarily the traditional way."

If you're not familiar with the likes of zipPay, Afterpay or OpenPay, then you soon will be. With the retail industry struggling to get people to spend, it's pretty hard these days to leave a checkout, whether it be online or in-store, and not have one of these options as a way to pay.

Put simply, these digital disruptors allow consumers to buy now and pay later. While not fee free they can be considerably cheaper than the humble credit card.

Afterpay, for example, allows you to defer payments over four fortnights.

The worst-case scenario is that if you miss all four instalments you'll be up for a maximum fee of $68 (a $10 late payment fee each time, plus another $7 if the instalment remains outstanding after one week). On a $300 purchase that works out to be about 22% of the purchase price.

zipPay offers you access to a digital wallet of up to $1000 to shop at your favourite stores. No interest applies but you're expected to make minimum repayments of $40 a month, and a $5 account fee is charged for every month you have a balance outstanding. Unlike credit cards, no fees apply if you don't have a balance.

The business model for these new lay-by systems relies on revenue coming from the retailers who support them.

But fees incurred by customers who are unable to meet the payments do contribute to their bottom line.

Sounds OK so far, so why should we be worried?

At a time when households are trying to pay off record debts I believe these services encourage irresponsible spending. Some do credit checks, others don't, and if you find yourself signing up on a regular basis you need to ask yourself when you are actually saving.

The temptation is there and quite frankly I almost bought something this way. It's so much easier to sign up for a jacket when you only have to pay $50 a fortnight rather than $200 upfront. Maybe it's my age but I decided to wait and save.

The funny thing is, when I had saved the cash I just couldn't justify the spend on the jacket.

Update: Afterpay has since updated its late fees. For each order below $40, a maximum of one $10 late fee may be applied per order. For each order of $40 or above, the total of the late fees that may be applied are capped at 25% of the original order value or $68, whichever is less

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