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When you rent things like a television, fridge or washing machine, you enter into a consumer lease. This will cover rental details you’ve agreed to like payment dates, amounts and timeframes.
Keep in mind, at the end of the lease, you may:
- have paid more than it would have originally cost you to buy the item
- not own the item.
A rent to own or rent to buy agreement is also a consumer lease. It can seem like an easy way to get goods that you can take home straight away. But there are risks.
Before you sign up, you should check all the costs. This includes any fees and charges on top of regular rental payments. Renting can be very expensive.
You can compare the costs of renting or buying products with the rent vs buy calculator. Use it before you sign any consumer lease. You may be paying much more than the item is worth. Read more about consumer leases and borrowing and credit on the Moneysmart website.
There are other options you should consider before you make a purchase.
You may be able to get part of your income support payment early. Getting an advance payment depends on:
- the type of payment you get from us
- how long you’ve been getting this payment
- whether you can afford to repay the advance within 6 months.
Lay-by allows you to pay for goods over time. You pay a deposit and then regular amounts over a certain period. There’s no interest charged on lay-bys. You can’t take the goods home until you’ve paid in full.
Buy now, pay later
Buy now, pay later is a payment option many stores, including online shops, offer. It gives you the chance to buy something, take it home and pay for it later. There’s often a set amount you’ll pay each fortnight over a period of time.
You may need to pay a small amount or deposit when you buy the product.
Some of the more well-known companies offering this payment option include:
The companies who offer this payment option act like banks. They can charge you for:
- late fees
- monthly account keeping fees
- payment processing fees.
If you buy multiple items with different companies, you could find it hard to keep track of your spending. Some companies will take the money straight from your bank account or credit card on the same day each fortnight. If you forget about the payments you could have your bank account overdrawn.
We can’t protect your income support payments from buy now, pay later payment options. The companies who offer these payment options will continue to take money out of your bank account until you have paid for the items. This can lead to your bank account being overdrawn.
If you overdraw your account, your bank can take money from your account to recover the money you owe. This includes from your Centrelink payment, which a Code of Operation normally protects. In this case, the Code of Operation won’t protect your income support payment from these companies.
The company and your bank may charge you fees too.
Example of overdrawn bank account
Sandy is a student. She gets Youth Allowance and has a casual job at a café. She gets 2 payments on a regular basis. Her Youth Allowance payment and pay go into her bank account on Thursday. That evening, Sandy buys some shoes online with a buy now, pay later payment option. She pays a deposit and her next payment is in a fortnight on Thursday.
Sandy has exams the next week and isn’t able to work at the café. Because Sandy worked 2 weeks ago she reported that income. This reduces her Youth Allowance to zero. On Thursday of the following week her account is debited for the next payment for her shoes. Sandy’s account is now overdrawn.
When Sandy gets her next Youth Allowance payment and pay, the bank will use it to pay Sandy’s overdrawn amount. They’ll also charge Sandy a fee for her account being overdrawn. As her account was overdrawn from a buy now, pay later payment, the Code of Operation doesn’t apply.
Keep in mind, if you don’t need your goods straight away, a lay-by is a less risky option.
Read more about buy now, pay later services on the Moneysmart website.
Some shops have interest free deals that let you take goods home before you pay for them. Interest free doesn't always mean cost free. Sometimes there are fees and charges. Read more about interest-free deals on the Moneysmart website.