Buy now, pay later platforms let you make a purchase immediately and pay it off over eight weeks; yet they sit in a loophole of not being credit providers, therefore not needing to screen applicants on whether they can pay off their debts.

Since users only need to have a valid email address, phone number, a working Australian bankcard, and be over the age of 18 to use Afterpay, many Australians who are already in unstable financial positions may find themselves sucked in by the idea of cardless credit.

Dr Janie Busby Grant, cognitive psychologist and researcher on human behaviour and decision making at University of Canberra, spoke on the psychology behind “buy now, pay later” marketing.

“Buy now, pay later platforms prey on cognitive biases that humans have when making decisions. For instance, we feel an immediate reward is worth more than a reward later,” Dr Busby Grant said. “$20 now feels like more than $20 in a week’s time, even though we know, technically, that’s not the case.

“Another, more obvious bias is avoiding negative feeling. In short, spending money makes us feel uncomfortable. Additionally, we tend to have a positive view of our future. We feel like we’ll be in a better financial position in the future, compared to right now.

“When you put all these factors together, you can see why [buy now, pay later marketing] is so powerful. They’re saying, ‘you can have what you want now, without the negative associations of paying money’, and you’re told you can pay it back in seemingly smaller amounts, at a time in the future where you think you will have more money.”

These biases aren’t a secret, nor is how they combine to make ‘buy now, pay later’ so seductive – least of all to the businesses behind the platforms.

Dr Busby Grant explained, “These companies employ psychologists and behavioural change specialists to study human behaviour and know how to exploit it. They use this in their marketing, advertising, and targeting of specific people groups.”

In 2018, the Australian Securities & Investments Commission (ASIC) found that 60 per cent of buy now, pay later users were between the ages of 18 and 34.

“People who are already in poverty are more likely to use [Afterpay] because they’re more in need of it,” Dr Busby Grant said. In that vein, she noted the concerning trend of buy now, pay later moving from more frivolous purchases like clothing to essential items, like food.

“A lot of these cognitive biases apply to people who are less likely to have cash on hand, young people fall in that vulnerable category.”

Nick Molnar, Afterpay’s now 31-year-old founder, once described millennials as “more afraid of credit card debt than they are of dying”.

“Afterpay debt is credit card debt in a different form,” Dr Busby Grant said.

“Financial consequences can include hidden fees and high interest rates, which can lead to users suffering the long-term effects of a bad credit rating, including getting a loan for a house or car.”

When is it time to seek help with buy now, pay later debt?

“The biggest sign is if you’re having trouble paying it off on time,” Dr Busby Grant advised.

“There are plenty of people who use credit cards and avoid paying fees because they pay it off each month.

“Cases in which you’re going to come off better financially after using these services are rare. If you’re not in a stable financial position, it’s better to avoid using credit altogether.”

If you are struggling with responsible spending, there are a few basic tips to use, including spinning cognitive biases in your favour when making a purchase.

“Pay cash. It hurts more if you’re handing over cash, making it so you’re less likely to spend, particularly if you’re struggling with impulse control,” Dr Busby Grant suggested.

“Change the context in which you’re making decisions. Instead of buying it online, walk away, and come back in an hour. Do you still feel that need to buy it?

“Lastly, think about the friends around you, that you may frequently go shopping with. Are any of them encouraging you to spend? Changing the context can change your spending habits.”

If you are struggling with responsible spending, consider seeking help from a financial advisor. Free financial help is available for UC students on campus, or you can visit a local service at canberraadvice.com.au

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