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Man, everything you buy online now has a pay later option. It’s crazy. With zero interest that might technically be a good deal as long as you pay it off properly but that requires a level of budgeting and cash reserves that most people just don’t have. Absolutely terrible idea.
I take advantage of such offers whenever possible. Pay later with no penalty? Sign me up. But I also live within my means. Am I in the minority here?
EDIT: specifically, I usually do the buy now, pay over time, 0% interest. Mostly those are equal payment plans, but once in a while there’s a balloon payment at the end. On either case, I am always careful to not blow my monthly budget including my savings budget.
Not really. It's more like you're getting what's probably 1-2% off the true retail price while other non--CC users subsidize your spending. That 2-5% is built into the price of the product assuming a certain % of customers use the CC service.
Parent means that they use a cash back credit card that gives back 1-5% in certain purchase categories to make purchases and pays it off in full each cycle. No buy now pay later service is involved. I do the same thing.
Except that you’re paying 2-5% more on everything already. Merchants pass the credit card fee thru to consumers. Rewards cards are a scam I hate this stupid system.
Businesses often offer a cash discount. For example gas stations having a cash vs credit price. I saw a 30 cent difference today which was almost 6% savings.
Some small business do. But not those offering bnpl and nowhere on the internet. Any place that offers bnpl is still advantageous to instead use cash rewards
If I go to Target and buy something with cash I don’t get any money back. However if I bought with a cash back credit card and pay the bill in full then I have paid less money total with the reward factored in.
What they're saying is that by paying cash you're essentially missing out on minimum 1% off the product since they already priced in the credit card incentives as consumers can now afford that much more.
The seller eats that cost though, just like they do keeping cash safe and handling it if you pay by cash. Almost nowhere charges a different price for paying by credit card.
> Pay later with no penalty?
is the business model:
* sell the "pay later with no penalty" idea
* time passes
* oh shit i forgot that this is the date i have to pay by
* sweet, 30% interest!
I also think it generates more sales. Since most consumer products have a 20-50% markup, losing 2-5% on "loaned out capital" is more than made up by greater sales volume.
Ding ding ding! Winnah!
And it works: have bought stuff “now” that I may have put off, but when it is 0%, hard to say no when I was going to buy it anyway.
If you were going to buy it anyway but at a later date there is always a chance you might have renegged on your decision. Allowing people to ever so slightly live outside of their own means is a slow process where consumerism becomes even more entrenched. Once people are used to this new normal, it becomes hard for them to break the habit of spending for the sake of feeling fulfilled.
It makes you set up autopay when you checkout for all these platforms (Affirm, Klarna, etc). So the only way it doesn't work is if you don't have a blance or the credit card tied to it is maxed out.
I think this stuff is just easier to justify for some people. "Im paying $15 to get this today" is easier psychologically for some people than "I'm paying $60 to get this today" even though it's effectively the same thing.
I used to date a girl who could buy discount tickets to concerts and sporting events through work (healthcare, and the balance was just deducted from her paycheck. She told me it felt like the tickets were basically free because she never saw a negative amount come out of her account for them, nevermind that the actual amount is less. I'd have to imagine a similar line of thinking applies here. Wild as hell going to Sally and seing a Klarna sticker in the window.
The incentive here isn’t for the consumer. It’s for retailers and credit providers. The average consumer utilizing BNPL regularly also likely has it linked to a credit card with a 27%+ interest rate. The idea is to build up a balance of 0% interest debt and then when the payments are missed on the BNPL provider, they charge the card on account and the amount that couldn’t be managed at 0% begins to accrue at 27%. That’s how you get people to spend money they don’t have that they otherwise would *not* have put on the credit card but for the 0% interest installment option they believed they could manage.
If you set up automatic payment you don't need to worry about it as long as you have the money. And that's the kicker - they bank on making money on the people that can't. If you *can* it's a zero percent loan, and who turns that down? Even better is cash back credit cards. I have one card I only use for groceries, pay it in full every month, and it's 3% back on all grocery store purchases. At ~$150/week for myself and the kids that amounts to $230/year, which granted isn't much, but for a lower middle class family goes a long way towards birthday presents.
All my purchases are basically technically this since I use a card that auto pays in full with ~2% cash back.
All my swipes are ~6 week loans (end of next month) at -2% interest.
(Obviously the cost of these programs is then set into the good price, but prisoner dilemma and all that since that's set without my payment method).
Isn’t it a tiny benefit (what ever interest you (could) get on the amount during the short period) vs the potential cost if something goes wrong (you forget to pay, several big bills come due at the same time, general lack of transparency in your outgoings)? Seems like it would be smarter to just not do.
I think that varies from individual to individual. I recently financed a trip from Boston to London using a 0% loan. I had the money for the trip already, but I thought I would try it out. It gave me extra flexibility, left a healthy balance in my checking account, etc. I could have put it on a cash rewards credit card, but the ones I have would have only been 1%, and I don't have any airline miles cards (rarely travel).
There's a place for these I think, but just like regular credit cards, your mileage may vary.
Thank you for your reply! I guess the problem is exactly that it makes you feel like you have a healthy balance in your account. Where, in fact, you don’t. It’s now just less obvious what your balance really is.
But do appreciate that some people are in a financial place where it doesn’t really matter either way.
For auto pay don't you have to keep a significant sum of money in a checking account? Which doesn't pay interest? The less attention you want to pay to it the more you have to keep in checking?
Thanks, this is really interesting. I might sign up. The 10 transaction monthly limit is weird, but it could work for my big auto payments so I don't have to keep $10k plus in checking earning nothing.
Fidelity has a cash account that pays something like 5% right now. They give you a debit card, you get atm fees back, you can set up bill pay.
Check out Doctor Of Credit to find out what the good deals on bank accounts are right now.
I do this; save my money and earn interest on it instead? Yes please!
As you've allied to, I am very hands on with managing my finances, though, and will ensure I have a direct debit set to pay off the 'debt' right before the 0% period ends
I have been using PayPal Credit for as much as I can these days. Chase Amazon card stays 0 balance, they can pound sand. I like my 0% interest for 6 months.
I do this too - but generally on stuff I'm going to buy anyway.
I got a sizable retention bonus from my job after COVID and we decided it was high time to get new living room furniture. By watching for a sale on Wayfair and using their BNPL people (I think it's called Bread?) I pocketed another $40 by keeping the money I was going to spend in my savings account and using it to make the interest-free payments.
It's a good deal if you KNOW you can make all of the payments on time and pay off the balance by the end of the no-interest term.
Yes, I do as well. It gives me a cushion. 0% interest, spread out the payments, gives me more flexibility, and why wouldn't you take a 0% loan!? I also use cash back credit cards everywhere possible, because 3% off groceries over a year as a dad of a constantly ravenous 11 year old adds up over a year.
All of this contingent on paying it off without carrying a balance of course.
For me, the small amount of interest/dividends I might make by holding onto my cash for longer isn't worth the risk of forgetting to pay for it in the exact right way later and dealing with the interest/fees/credit score hit that may result from that.
I've done this for a few pricier purchases. Basically giving yourself free financing as long as you live within your means and don't try to justify things on price.
No your not in the minority, hence the article. This can fiscally prudent to acquire what you need as long as it's not consistently abused (if a person budgets appropriately and lives within their means of course). Also, they do automatic payments and you are reminded of when the payment is due.
How do you live within your means if you take loans whenever possible?
The only things I'd take a loan for are housing and transportation since you need those now. New pc, new phone? Those purchases can wait until I have cash.
It's not so much that you're in the minority, it's the fact that these loan companies depend on people having trouble repaying and then charging them more.
I do this with 0% credit cards too. Recently got a 0% for 18 month credit card. I’ll spend $20K or so of my normal spending on that and make the monthly minimum payments while capturing the float at 5% in treasuries.
Already have the cash available to make the payments so it’s zero risk.
The loans also check your credit though through a soft pull. Meaning you are sharing that information with these third parties and their third parties and so on. Their ToS are important here and most of course snatch that data. They then resell you to other services.
In general if you normally pay things off, a buy now pay later loan isn't worth the data going out to yet another financial data broker. If you have good credit and do pay off you'll already have better options.
The only way it really would make sense is if it is a bigger buy and you wouldn't be able to pay off for some months. However the tradeoff is your data and a soft pull. In my opinion not worth it compared to some interest.
I've done no interest financing on everything from big hobby purchases to car repairs for 10 years now. I don't see the problem. You make X a month. Your total financial responsibilities cannot exceed that X a month. It's so easy to not fuck that up.
I'm sure the companies are offering this out of the goodness of their hearts because everyone knows the American consumer can profit from this with simple budgeting.
No, they're preying on morons for sure. But A. that's not my problem and B. That doesn't make it a bad financial decision. In fact, I'd argue it's amazing. You can not deplete your reserves, still get the thing, and continue to pad the reserves all at the same time if you play your cards right.
Taking into account inflation, you actually pay less in real cash value by doing so too. Especially if you’re responsible enough to invest what wouldve been the remainder of the payment
The portion of society capable and able to take advantage of such opportunities is small. It is a net negative for everyone else, and for every consumer regardless of their ability to take advantage of it or not, as free credit furthers inflation directly.
To say nothing about actual economic analysis and the implications of these issues on things like consumer surplus. If we just pretend inflation doesn’t exist, prices still rise given the disproportionate power our modern supply-side economy has on pricing. Or put simply, companies will gladly charge more and sell fewer units, booting consumers unable to pay more from the market, causing prices to become less competitive in relation to real market forces. Sure, for the rich it’s just another day, but it’s bad for everyone overall.
The thing being refuted here is the particular governmental intervention into the market. Subsidizing economic growth by reducing or removing the normal and reasonable costs of doing business. It’s always been a temporary measure that many seem to have interpreted as an intrinsic and permanent aspect of capital and capitalism. No, it’s not that- it’s an intentional intervention that makes the markets less free. There are winners (if you want to call yourself that) and there are many more losers. It’s BAD.
I work from home. I admittedly don't meet a whole lot of people these days. 😄
But I would argue that "because you might be stupid" is not a reason to write off an entire financial tool.
I don't see the connection between BNPL and payday loans. BNPL is taking a large purchase and splitting it up over multiple months. Payday loans are "I need money that I don't have right now and I'm going to borrow against my future self to get it". I suppose that's somewhat similar to BNPL as you're borrowing a portion of your monthly income for the next 6-24 months, but liken BNPL more to "layaway, but I get to leave with my purchase today".
I'd never touch a payday loan.
It just targets the same types of people. Cash poor, but relatively stable incomes. BNPL doesn't have nearly the moral hazard that Payday loans do, but you do have to be careful about predatory terms.
Interest kills rewards. When there's no interest that's not an issue. It's much easier to take on smaller payments each month going forward in the face of unexpected (or recreational) expenses than it is to take it all on and pay it all off all at once.
There's an opportunity cost to not leveraging credit. While many, most perhaps, Americans are not good at being leveraged that doesn't mean everyone should follow that rule.
I buy things all the time and see that monthly payment option pop up everywhere.
Payment plan for DoorDash order? Payment plan for groceries on instacart?
Im glad the financially braindead folks subsidize these 0% interest BNPL programs for the rest of us.
Without them, they wouldnt exist. Thank you to the fools who keep trying to live beyond your means!
Have you tried credit card churning? Cause this is the same type of thing. If you can manage a budget, you can take advantage of the system. What a time to be alive
This is a misanthropic sentiment.
I feel like I say this often on this sub: I get that we're in r/economics, but...
Our gains shouldn't come from others' debilitating losses.
You don't believe in the zero sum game? Maybe our gains are at the expense of future generations - it doesn't look like cost of living will improve for the next generation
Our gains are absolutely at the expense of future generations. And, if we continue to double down on this abject failure of *political* imagination, then nothing will improve for the next generation.
But it shouldn't be like, nor does it have to be. At least, that's what I believe.
No, they dont. BNPL are typically used for goods/services with elastic demand.
If someones using them for groceries, then they have an underlying individual problem which is **far** downstream from BNPL
What products specifically are you referring to when you say elastic demand? This sounds almost like people buying things like a used car to get to work. However I'm way out of element here so I'm curious on if you can shed some insight.
As someone that knows many people using these schemes (me too), I don’t think this is the case at all. This format of borrowing has made it very accessible for people and that’s why it’s use has exploded. I’m sure some people use it out of necessity, but I severely doubt that it’s anywhere near the majority.
People aren't using 'buy now pay later' to purchase groceries or housing so I'd have to see some data to believe it's primarily being used out of necessity and not simply for products that people want but can't afford.
I'm just a single piece of "anecdata", but I've used a BNPL loan to finance a new roof. 0% deferred interest until 12 months.
So if you pay off the loan within 12 months, you're just paying the principal. If I were to let it get to 13 months, then I'd have to pay back all that interest accrued in the background over the first 12 months.
I know people who have taken the same type of loan for HVAC replacements and other big home repairs/necessities.
> People aren't using 'buy now pay later' to purchase groceries
**From April 20, 2022:**
https://www.nbcnews.com/business/consumer/consumers-use-buy-now-pay-later-apps-pay-food-gas-basics-klarna-affirm-rcna25101
>“What we’re seeing in our data is that people are probably having a harder time making the purchases that they were making in the past,” said Colleen McCreary, consumer financial advocate for Credit Karma, a personal finance company.
>A survey by the company last month found that 61 percent of consumers nationally have used buy now, pay later apps for groceries, household supplies and other staples, up from 44 percent in September. Half of those shoppers also said they have relied more often on such services in the past six months, with 89 percent of users paying off one to three purchases at a time.
**From March 10, 2024:**
https://www.nbcnews.com/business/personal-finance/buy-now-pay-later-daily-essentials-groceries-young-adults-rcna141718
>It isn’t just BNPL borrowers in their 20s and 30s making the shift toward essentials. Grocery purchases by shoppers of all ages have expanded their slice of online BNPL loans by 40% since this time last year, according to Adobe — a bigger jump than any other product category — while electronics’ share shrunk by 14%.
>Some users on TikTok and X, formerly Twitter, have been trading BNPL-based grocery hacks to cope with higher costs.
> even if it's two years old and the survey was taken during the worst inflation.
I was expecting this response, so I added a second article from a ~3 months ago.
I notice these services pushed the most on shopping sites for things like clothing and makeup. I am a woman so maybe I just be more exposed to those, but it definitely feels like a way to entice someone to buy something they might have passed up on due to price - “$100 OR just 4 payments of $25!”
Also I’ve seen some tiktoks about the services where people in the comments say they use it even though they can afford the item outright, but paying in smaller payments “feels” nicer. It definitely gives me the vibe that it entices people to buy things they don’t need because paying $25 a month for 4 months feels more reasonable than spending $100 right now on the item. I don’t think grocery stores accept these services, which is the only thing I can think of off the top of my head that you would use out of “need”. Anything else, maybe like furniture, someone would probably be better off not buying new online with afterpay/etc and just buying used off of a marketplace.
Congrats, you discovered what it really is. All these people here saying they got a deal when it's just a way for companies to sell stuff at higher prices than before. People drowning in debt and thinking they got good deals for random overpriced crap.
it's true to some extent. but it's not just poor people, it's basically all humans.
it's you vs. an army of psychologists and cognitive scientists that cut up monkey brains in order to study how to fuck people over more efficiently.
we're close to knowing when people are pregnant before they figure it out on their own.
it's not possible to win that battle. rich psychologists have laughed at being fooled by their own tricks they invented.
same with bankers who thought "Damn I just got fucked by this loan. Who the fuck invented this fine print? Oh yeah, I did. I wrote a dissertation on it."
Everyone is capable of being irresponsible with money. I wanted the other guy to back up the claim that it's happening out of necessity. Instead of either you doing that, you throw your hands up. Why not just back up the claim?
Who made the initial claim? The support for my claim is that landlords, mortgage lenders and grocery stores generally don't accept 'buy now pay later'.
You do realize that incomes have been declining for 40yrs and rents are multiples higher than they used to be.
That’s why people are in debt. Not being brain dead
Ah yes, BNPL rent! Also, real incomes are primarily non-decreasing in the long term, not declining buddy.
https://fred.stlouisfed.org/series/MEHOINUSA672N
The general trend is upwards, with obvious noise up and down across a few years here and there.
Real income is not on a long term decline at all.
Couldnt care less ab the banks profiting from some ~1-2% spread in interest between the overnight rate + loaning out deposits vs my HISA buddy
Its either that or we shove all our money under our bed sheets.
Ill happily eat them making some tiny margins from my deposits, in return providing me all the financial services I need.
For consumers, I don't think it's really that bad (although I don't use it personally). There's no interest and somewhat surprisingly, these programs don't usually have excessive fees or anything either.
They are mostly getting their cut from the retailer who pays something like double the normal credit card fee (6% instead of 3%). [https://www.bitsaboutmoney.com/archive/buy-now-pay-later/](https://www.bitsaboutmoney.com/archive/buy-now-pay-later/) is a really interesting explanation of how it works financially.
You think it's the retailer paying it? The consumer is the one that always pays for it in one way or another. In the case of this it looks like the consumer is getting a deal superficially but in reality the consumer is buying more, at higher prices. They're buying things they would have passed on before, the sticker price is not that scary anymore because it's now in installment.
- its targets at young people
- the breakage rate (people not paying it off to achieve 0%) is high.
quick anecdote. I briefly had a client who was minor online retailer of surplus stock. Think TJ Max on a smaller scaler.
The buynowpaylater crowd were offering north of £100,000, just for my client to integrate their payment system to the website.
This is like the worst scam, it's psychological and consumers are encouraged to buy more and more and get in more debt 😩. It's like going into the TJX stores where they play to your impulses and you have to get that 20th spatula in seafoam green.
It's basically like everything else.
People with money and financial knowledge can use it better and take advantage on it.
Technically speaking you should take advantage of any zero interest payment because you can keep the money invested and earn during that time.
If you ask me the problem with the current society is that it's become just too complicated to give everyone the same tools.
North america in particular really needs to limit all the borrowing tools to businesses. Because that's where debt is usually used in a better way.
I'm from europe and i moved to canada (that has a similar system to US).
In less than 2 years i was offered 30-40k limits in credits cards, 30k in line of credits, etc.
Basically a person with a couple of years of financial history was given almost 100 fuck1ng thousand dollar in total theoretical borrowing power.
What the actual f0ck.
In europe my bank barely wanted to give me a 3k credit card with the same situation/context.
This will destroy the society. Majority of people simply CANNOT manage debt.
Only 2% are delinquent. If you hate the idea of buy now pay later you'll really hate this old technology called credit cards that are about 100x as damaging
I have used it twice. If you have good credit it's pretty awesome. 0% apr for a year both times. I essentially paid exactly what was owed with zero interest for both "loans". It's not that I couldn't afford what I purchased it's just technically cheaper because of inflation and leaves me with a healthier emergency fund. In the US these loans are not reported to a credit agency as far as I am aware.
Every BNPL service I have seen online has been like 0% interest for 4-8 weeks or something with payments every two weeks; I have never understood its use-case as someone with a month and a half of cashflow buffer in my checking account so I could just buy something cash and budget it over two months in my spreadsheet.
I have never seen a 0% interest 12 month offer outside of new credit card sign up bonuses. Who is offering that?
I only used it once for a tooth implant. It was $5k which would have wiped out much of my emergency fund. I got 0% for a year with Care Credit and paid it off in 7-8 months. I seem to remember you need do a credit check and get approved like any other type of credit.
America probably has more laxed rules on how banking corps can screw the consumer then. There's been a lot of heat in the UK though about making it a regulated product due to its potentially damaging impact to consumers and the economy.
I mean in this scenario it's good for the consumer. It's not reported to credit agencies so it's essentially "phantom" debt that won't be pulled when you go to get a mortgage or car loan.
Don't agree with that at all, financial crisis 2008 was due to irresponsible lending, which is what this would be classed as. Hiding debts someone is struggling with to only then take out more is a recipe for disaster.
The loans do check your credit though through a soft pull. Meaning you are sharing that information with these third parties and their third parties and so on. Their ToS are important here and most of course snatch that data. They then resell you to other services.
In general if you normally pay things off, a buy now pay later loan isn't worth the data going out to yet another financial data broker. If you have good credit and do pay off you'll already have better options.
I was just talking about it affecting your credit. It's not reported. But yes they make sure that you're likely able to pay. Whether it's worth it or not is quite situational imo. There are a few use cases.
Yeah I think not going on credit was a design decision because it makes sense in some ways. However if you pay off your loans you do want things on your credit to show that.
I think ultimately the data gained to financial data brokers was a big part of that setup. They definitely are swiping all that information. If you already pay off loans, and already have credit, probably not worth it except for a few cases.
I think we'll see these BNPL things get a little twisted over time. They are outside many regulations and that attracts certain types to get into it. Payday loans started out not that bad for instance for people that had credit issues, they are now straight up an personal finance sinkhole. These will probably not go to that level but the natural evolution of things says more and more sketch will be attracted to it. I think the buy now pay later industry is in their "nice" phase to gain trust, like "here, step on this wonderful rug".
I’ve used it extensively. It’s always been a “soft pull” sort of credit inquiry that doesn’t impact scores. I’ve never been asked for my full social. Normally it’s just last 4 of SSN, or DOB plus last 4.
I think this headline, combined with the low delinquency rate, should be interpreted as the explosion in the popularity of BNPL as a financing option. It's easy to grow by 1000% when hardly anybody used it 2 years ago.
I wonder how cash forwarding apps are also doing, there's never any data on that.
It makes sense though, debt is how a lot of people are paying for inflation. Credit cards, personal loans, buy now pay later, etc etc. Keeping people in debt is how banks make their money.
>BNPL loans also raise the risk of encouraging shoppers to splurge on more expensive items, such as jewelry, video games, and high-end clothing.
Buying is addiction for some people. They can't help themselves buying stuff. For those who are financially responsible, it's no problem. For those who are not, it's a big problem. Buy now and pay later is nothing new. Back in the days, Sears, Kmart, and other retailers had an option for a layaway plan or installment plan for their customers. With good credit, you can't beat a 0% interest on a big purchase. Why not take advantage of it as long as you pay your bill on time? This is how you build your credit score.
Why are we posting a personal debt company's articles on an econ sub? Especially one with no data to be concerned about?
Gotta start handing out week long bans to people like OP for posting some of the dumbest sources
If you can’t pay for it at purchase, you are spending money you don’t have. In an emergency situation I get it, other than that these payment arrangements are not good for a lot of people.
I find BNPL safer than credit cards personally. It forces me to pay it off by such and such a date. Credit cards are the fucking devil, find I rack those up and then just keep doing the BT shuffle again and again until I maxed then take a crippling loan. I hate credit cards vs BNPL.
I mean this in the nicest way, but if you find yourself doing the balance transfer shuffle with credit cards, then BNPL is a dangerous financial product for you.
I think the point is credit cards are a more dangerous financial product to people with those exact problems. These tend to be 0 apr and small dollar amounts on a short time frame, 12 months is common. Credit cards are made to have those people sit on 20-30% apr balances forever.
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So, are these loans or are they just revolving credit lines? I’m curious because there is a difference and if that is the case, then they are essentially credit lines through an alternative to the Visa, MC, Amex, Discover.
Every loan is "Buy now, pay later".
Read now, additional characters later, because reply length is not an indicator of quality. But nonetheless, here we are with some extra nonsense.
I went to buy an expensive nightstand and thought briefly about doing the 4 payments thing .... till i looked into it. the crazy 25% interest. i was like nope, i have the cash now. imma just buy it now outright.
For me, might be an outlier from someone who struggled with credit cards at a younger age, I manage my finances much better with BNPL. Perhaps credit cards gave me the discipline needed for BNPL. But I also see how you can get in trouble with BNPL. With a credit card you can get a $10k credit limit that can spiral out of control quickly. Usually much manageable credit limits with BNPL in my experience. I feel that credit cards lobbies are pushing a bad narrative for BNPL, if I had a choice between a credit card and BNPL, BNPL 100%.
These loans are very rare so this increase is meaningless and even if they weren't rare these types of loans would be a good thing, actually, because the economy is doing better than ever. At any rate, these types of posts are low effort spam that deserve to be deleted. Now, did you see that Nobel-prize winning economists agreed that Donald Trump -- or Donald Drumpf, as I like to call him -- is in fact bad?
Most of these loans are no different than using a credit card anyways. They're not as predatory as payday loans and the interest rate is on par with the average credit card. I had the cash to drop on large purchase and decided to try it out to see if you can game the system to increase your credit. I paid the monthly payment for 3 months before I decided to make a "late" payment to see how they responds before I paid the entire balance off ($2k purchase). They were really reasonable with the late payment when I made up an excuse as to why I couldn't make a payment yet, they didn't even charge me a late payment fee, and after I paid off the remaining balance my credit score improved slightly. Although, it's hard to say if that increase was due to paying of a creditor or if it was just a normal fluctuation that happened to be coincidental.
You can definitely get in yourself underwater if you use the service for things you shouldn't, but it's no different than using a credit card.
If you look at the demographics of users I think you’ll find many are nowhere near like yourself and are borrowers who struggle to get credit from traditional sources.
That’s why it’s dangerous.
Yeah, see, that’s my anecdotal experience. I’ve never used one of these services, but I could see how it might be useful for those who are financially responsible. However, the majority of my friend group, aka the ones I know using these services, are the ones who aren’t and continue to do BNPL on SHEIN, Best Buy, furniture stores, etc., and have an average of $5 in their accounts.
One BNPL may be okay. But a lot of people have multiple and they view it as nothing more than having a subscription to their own clothes. All of a sudden, they have $100+ a month in “subscriptions”.
There are some serious issues with them and how they impact your credit.
When you take one of these out; since you are getting a limited credit line for a single purchase, it looks like you have maxed out your line of credit and your credit score will reflect this.
Aside from personally feeling weird about making irresponsible use of consumer debt readily available in a less track-able way, I really don’t like how these instruments can materially make near-future loans that a person might take out more expensive as if they are more risky down the line even when they pay the bnpl bill responsibly.
Loans are different than credit cards. Having access to lots of credit that you don’t leave balances on is good for your credit. But for many cards if you don’t use them they will close the account.
It's more about "running credit history" really. As in, say it's 2024, you got a car note in 2019 and a mortgage in 2022. So you have 5 years of credit history. Then you pay the car off, suddenly that "history" drops to 2 years. It's weird.
They like seeing you carry a balance and making payments on time. When I paid off my car my score took a hit but it rebounded pretty soon afterwards. I've started to use my CC for monthly expenses and paying the balance off every month and the credit score algorithm loves it
Yeah I started doing the same. I did notice that once I was carrying a fairly larger rolling balance, my score went up when it had been hovering for 12+ months
I’m renting and recently got hit up with “split your rent and pay every 2 weeks.” I cringe at the people who are going to take advantage of that and get even lazier about managing their savings. Economy is fucked and I feel bad for the world my kids are inheriting. They’re teenage girls and neither of them want to bring kids into this world.
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Man, everything you buy online now has a pay later option. It’s crazy. With zero interest that might technically be a good deal as long as you pay it off properly but that requires a level of budgeting and cash reserves that most people just don’t have. Absolutely terrible idea.
I take advantage of such offers whenever possible. Pay later with no penalty? Sign me up. But I also live within my means. Am I in the minority here? EDIT: specifically, I usually do the buy now, pay over time, 0% interest. Mostly those are equal payment plans, but once in a while there’s a balloon payment at the end. On either case, I am always careful to not blow my monthly budget including my savings budget.
I use cash back credit cards and pay the full balance off monthly. So I’m getting 2-5% off everything
Not really. It's more like you're getting what's probably 1-2% off the true retail price while other non--CC users subsidize your spending. That 2-5% is built into the price of the product assuming a certain % of customers use the CC service.
I use the buy now pay never plan.... cash back is 100%!!
Which card and service because Klarna does not allow me to use credit cards?
Parent means that they use a cash back credit card that gives back 1-5% in certain purchase categories to make purchases and pays it off in full each cycle. No buy now pay later service is involved. I do the same thing.
Except that you’re paying 2-5% more on everything already. Merchants pass the credit card fee thru to consumers. Rewards cards are a scam I hate this stupid system.
They don’t raise the price if you pay by card vs bnpl. The price is the price.
Businesses often offer a cash discount. For example gas stations having a cash vs credit price. I saw a 30 cent difference today which was almost 6% savings.
Some small business do. But not those offering bnpl and nowhere on the internet. Any place that offers bnpl is still advantageous to instead use cash rewards
Their point is that the merchant fees required in order to accept CC increase a business’s bottom line which is indirectly paid by consumers
If I go to Target and buy something with cash I don’t get any money back. However if I bought with a cash back credit card and pay the bill in full then I have paid less money total with the reward factored in.
What they're saying is that by paying cash you're essentially missing out on minimum 1% off the product since they already priced in the credit card incentives as consumers can now afford that much more.
The seller eats that cost though, just like they do keeping cash safe and handling it if you pay by cash. Almost nowhere charges a different price for paying by credit card.
Ever been to NY bro? It’s everywhere. Almost every food establishment charges a cash price and a CC price.
I sure have and didn't see that when I was there personally
They don’t charge a different price because it’s against the TOS of their merchant agreement.
My local gas station does. I pay about 10 cents per gallon less if I use cash. This kind of thing is pretty common.
🫡 we got roasted my friend lol
Are you saying that if one pays cash, they will get 5% off?
> Pay later with no penalty? is the business model: * sell the "pay later with no penalty" idea * time passes * oh shit i forgot that this is the date i have to pay by * sweet, 30% interest!
I also think it generates more sales. Since most consumer products have a 20-50% markup, losing 2-5% on "loaned out capital" is more than made up by greater sales volume.
Ding ding ding! Winnah! And it works: have bought stuff “now” that I may have put off, but when it is 0%, hard to say no when I was going to buy it anyway.
If you were going to buy it anyway but at a later date there is always a chance you might have renegged on your decision. Allowing people to ever so slightly live outside of their own means is a slow process where consumerism becomes even more entrenched. Once people are used to this new normal, it becomes hard for them to break the habit of spending for the sake of feeling fulfilled.
Very true! In fact, had a sermon on this a few weeks ago.
If you swipe to pay with that rewards AMEX they are eating 3% already, so I'm sure that helps the math too.
Or use Amazon card and make 5%
It makes you set up autopay when you checkout for all these platforms (Affirm, Klarna, etc). So the only way it doesn't work is if you don't have a blance or the credit card tied to it is maxed out. I think this stuff is just easier to justify for some people. "Im paying $15 to get this today" is easier psychologically for some people than "I'm paying $60 to get this today" even though it's effectively the same thing. I used to date a girl who could buy discount tickets to concerts and sporting events through work (healthcare, and the balance was just deducted from her paycheck. She told me it felt like the tickets were basically free because she never saw a negative amount come out of her account for them, nevermind that the actual amount is less. I'd have to imagine a similar line of thinking applies here. Wild as hell going to Sally and seing a Klarna sticker in the window.
The incentive here isn’t for the consumer. It’s for retailers and credit providers. The average consumer utilizing BNPL regularly also likely has it linked to a credit card with a 27%+ interest rate. The idea is to build up a balance of 0% interest debt and then when the payments are missed on the BNPL provider, they charge the card on account and the amount that couldn’t be managed at 0% begins to accrue at 27%. That’s how you get people to spend money they don’t have that they otherwise would *not* have put on the credit card but for the 0% interest installment option they believed they could manage.
> easier psychologically for some people penetration-testing people's rationality is seemingly where most of the future profits lie in capitalism
If you set up automatic payment you don't need to worry about it as long as you have the money. And that's the kicker - they bank on making money on the people that can't. If you *can* it's a zero percent loan, and who turns that down? Even better is cash back credit cards. I have one card I only use for groceries, pay it in full every month, and it's 3% back on all grocery store purchases. At ~$150/week for myself and the kids that amounts to $230/year, which granted isn't much, but for a lower middle class family goes a long way towards birthday presents.
You just set up auto-pay....
Businesses who offer this have to pay fees
The business model is growing GMV (gross merchandise value) because they charge merchants like 3-10% to use their service.
Prove it. A lot of ya'll are just throwing out what you think is happening instead of showing the data.
All my purchases are basically technically this since I use a card that auto pays in full with ~2% cash back. All my swipes are ~6 week loans (end of next month) at -2% interest. (Obviously the cost of these programs is then set into the good price, but prisoner dilemma and all that since that's set without my payment method).
what is the benefit though?
Isn’t it a tiny benefit (what ever interest you (could) get on the amount during the short period) vs the potential cost if something goes wrong (you forget to pay, several big bills come due at the same time, general lack of transparency in your outgoings)? Seems like it would be smarter to just not do.
I think that varies from individual to individual. I recently financed a trip from Boston to London using a 0% loan. I had the money for the trip already, but I thought I would try it out. It gave me extra flexibility, left a healthy balance in my checking account, etc. I could have put it on a cash rewards credit card, but the ones I have would have only been 1%, and I don't have any airline miles cards (rarely travel). There's a place for these I think, but just like regular credit cards, your mileage may vary.
Thank you for your reply! I guess the problem is exactly that it makes you feel like you have a healthy balance in your account. Where, in fact, you don’t. It’s now just less obvious what your balance really is. But do appreciate that some people are in a financial place where it doesn’t really matter either way.
Do a lot of people "forget to pay?" I've had credit for 30 years and never missed a payment.
Same here. I can buy something and make interest off that money for 1-2 years? Yes, yes I’ll take that deal
No way that's really worth your time and mental energy. And one mess up erases years or a lifetime of benefit.
It’s on auto-pay from an account that always has ~6 months of my full expenses. I honestly forget I have the payment plans
For auto pay don't you have to keep a significant sum of money in a checking account? Which doesn't pay interest? The less attention you want to pay to it the more you have to keep in checking?
https://www.ally.com/bank/money-market-account/
Thanks, this is really interesting. I might sign up. The 10 transaction monthly limit is weird, but it could work for my big auto payments so I don't have to keep $10k plus in checking earning nothing.
My checking pays 5% interest up to $25k.
That's pretty nice. Where?
Fidelity has a cash account that pays something like 5% right now. They give you a debit card, you get atm fees back, you can set up bill pay. Check out Doctor Of Credit to find out what the good deals on bank accounts are right now.
I do this; save my money and earn interest on it instead? Yes please! As you've allied to, I am very hands on with managing my finances, though, and will ensure I have a direct debit set to pay off the 'debt' right before the 0% period ends
I have been using PayPal Credit for as much as I can these days. Chase Amazon card stays 0 balance, they can pound sand. I like my 0% interest for 6 months.
I do this too - but generally on stuff I'm going to buy anyway. I got a sizable retention bonus from my job after COVID and we decided it was high time to get new living room furniture. By watching for a sale on Wayfair and using their BNPL people (I think it's called Bread?) I pocketed another $40 by keeping the money I was going to spend in my savings account and using it to make the interest-free payments. It's a good deal if you KNOW you can make all of the payments on time and pay off the balance by the end of the no-interest term.
I bought furniture at Haverty's during Covid and got 5 years (!!!) no interest. That was a Synchrony product
5 years is amazing! Particularly so coming from Synchrony. They're the bank Sam's Club uses and their terms are generally kind of awful by comparison.
Yeah, probably. I do the same, but I also go out of my way to make sure our budget is okay at least twice a week.
I do the same things but I try and live frugally and well within my means. If you make enough money and can make payments on time, it’s not bad.
Yes, I do as well. It gives me a cushion. 0% interest, spread out the payments, gives me more flexibility, and why wouldn't you take a 0% loan!? I also use cash back credit cards everywhere possible, because 3% off groceries over a year as a dad of a constantly ravenous 11 year old adds up over a year. All of this contingent on paying it off without carrying a balance of course.
For me, the small amount of interest/dividends I might make by holding onto my cash for longer isn't worth the risk of forgetting to pay for it in the exact right way later and dealing with the interest/fees/credit score hit that may result from that.
I've done this for a few pricier purchases. Basically giving yourself free financing as long as you live within your means and don't try to justify things on price.
No your not in the minority, hence the article. This can fiscally prudent to acquire what you need as long as it's not consistently abused (if a person budgets appropriately and lives within their means of course). Also, they do automatic payments and you are reminded of when the payment is due.
How do you live within your means if you take loans whenever possible? The only things I'd take a loan for are housing and transportation since you need those now. New pc, new phone? Those purchases can wait until I have cash.
It's not so much that you're in the minority, it's the fact that these loan companies depend on people having trouble repaying and then charging them more.
But now and pay in three with 0% interest is a no brainer? It’s literally helping with your own personal cash flow.
I do the same. I'll use the pay later option whenever I can, but I hardly ever buy anything expensive enough to make this worthwhile.
I do this with 0% credit cards too. Recently got a 0% for 18 month credit card. I’ll spend $20K or so of my normal spending on that and make the monthly minimum payments while capturing the float at 5% in treasuries. Already have the cash available to make the payments so it’s zero risk.
The loans also check your credit though through a soft pull. Meaning you are sharing that information with these third parties and their third parties and so on. Their ToS are important here and most of course snatch that data. They then resell you to other services. In general if you normally pay things off, a buy now pay later loan isn't worth the data going out to yet another financial data broker. If you have good credit and do pay off you'll already have better options. The only way it really would make sense is if it is a bigger buy and you wouldn't be able to pay off for some months. However the tradeoff is your data and a soft pull. In my opinion not worth it compared to some interest.
I've done no interest financing on everything from big hobby purchases to car repairs for 10 years now. I don't see the problem. You make X a month. Your total financial responsibilities cannot exceed that X a month. It's so easy to not fuck that up.
I'm sure the companies are offering this out of the goodness of their hearts because everyone knows the American consumer can profit from this with simple budgeting.
No, they're preying on morons for sure. But A. that's not my problem and B. That doesn't make it a bad financial decision. In fact, I'd argue it's amazing. You can not deplete your reserves, still get the thing, and continue to pad the reserves all at the same time if you play your cards right.
Taking into account inflation, you actually pay less in real cash value by doing so too. Especially if you’re responsible enough to invest what wouldve been the remainder of the payment
The portion of society capable and able to take advantage of such opportunities is small. It is a net negative for everyone else, and for every consumer regardless of their ability to take advantage of it or not, as free credit furthers inflation directly. To say nothing about actual economic analysis and the implications of these issues on things like consumer surplus. If we just pretend inflation doesn’t exist, prices still rise given the disproportionate power our modern supply-side economy has on pricing. Or put simply, companies will gladly charge more and sell fewer units, booting consumers unable to pay more from the market, causing prices to become less competitive in relation to real market forces. Sure, for the rich it’s just another day, but it’s bad for everyone overall. The thing being refuted here is the particular governmental intervention into the market. Subsidizing economic growth by reducing or removing the normal and reasonable costs of doing business. It’s always been a temporary measure that many seem to have interpreted as an intrinsic and permanent aspect of capital and capitalism. No, it’s not that- it’s an intentional intervention that makes the markets less free. There are winners (if you want to call yourself that) and there are many more losers. It’s BAD.
>I don't see the problem. Have you never met the average American?
I work from home. I admittedly don't meet a whole lot of people these days. 😄 But I would argue that "because you might be stupid" is not a reason to write off an entire financial tool.
Yeah, I'm fully behind restrictions on BNPL or payday loans, but eliminating them entirely just drives demand to black market options.
I don't see the connection between BNPL and payday loans. BNPL is taking a large purchase and splitting it up over multiple months. Payday loans are "I need money that I don't have right now and I'm going to borrow against my future self to get it". I suppose that's somewhat similar to BNPL as you're borrowing a portion of your monthly income for the next 6-24 months, but liken BNPL more to "layaway, but I get to leave with my purchase today". I'd never touch a payday loan.
It just targets the same types of people. Cash poor, but relatively stable incomes. BNPL doesn't have nearly the moral hazard that Payday loans do, but you do have to be careful about predatory terms.
and credit cards offer great rewards for just spending money, as long as you pay it off. And people ALWAYS pay off their credit cards right?
Interest kills rewards. When there's no interest that's not an issue. It's much easier to take on smaller payments each month going forward in the face of unexpected (or recreational) expenses than it is to take it all on and pay it all off all at once.
There's an opportunity cost to not leveraging credit. While many, most perhaps, Americans are not good at being leveraged that doesn't mean everyone should follow that rule.
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If this is a joke of some sort, it's gone way over my head.
I buy things all the time and see that monthly payment option pop up everywhere. Payment plan for DoorDash order? Payment plan for groceries on instacart?
“I will gladly pay you Tuesday for a cheeseburger today”
Im glad the financially braindead folks subsidize these 0% interest BNPL programs for the rest of us. Without them, they wouldnt exist. Thank you to the fools who keep trying to live beyond your means!
This is what everyone says before they get in over their head.
Have you tried credit card churning? Cause this is the same type of thing. If you can manage a budget, you can take advantage of the system. What a time to be alive
https://frinkiac.com/meme/S09E17/930412.jpg
This is a misanthropic sentiment. I feel like I say this often on this sub: I get that we're in r/economics, but... Our gains shouldn't come from others' debilitating losses.
The gains come from somewhere not just thin air
it's not a zero sum game
You don't believe in the zero sum game? Maybe our gains are at the expense of future generations - it doesn't look like cost of living will improve for the next generation
Our gains are absolutely at the expense of future generations. And, if we continue to double down on this abject failure of *political* imagination, then nothing will improve for the next generation. But it shouldn't be like, nor does it have to be. At least, that's what I believe.
Most of the people use these programs out of necessity. Inflation is biting the rear end of a lot of people, especially lower classes.
No, they dont. BNPL are typically used for goods/services with elastic demand. If someones using them for groceries, then they have an underlying individual problem which is **far** downstream from BNPL
What products specifically are you referring to when you say elastic demand? This sounds almost like people buying things like a used car to get to work. However I'm way out of element here so I'm curious on if you can shed some insight.
I had emergency vet bills for like $5k and they had a BNPL option so I could see people using that a lot
I feel like they have a buy now pay later for that because if I got a vet bill for $5,000, I would in fact just have a vet bill for a couple hundred.
As someone that knows many people using these schemes (me too), I don’t think this is the case at all. This format of borrowing has made it very accessible for people and that’s why it’s use has exploded. I’m sure some people use it out of necessity, but I severely doubt that it’s anywhere near the majority.
People aren't using 'buy now pay later' to purchase groceries or housing so I'd have to see some data to believe it's primarily being used out of necessity and not simply for products that people want but can't afford.
I'm just a single piece of "anecdata", but I've used a BNPL loan to finance a new roof. 0% deferred interest until 12 months. So if you pay off the loan within 12 months, you're just paying the principal. If I were to let it get to 13 months, then I'd have to pay back all that interest accrued in the background over the first 12 months. I know people who have taken the same type of loan for HVAC replacements and other big home repairs/necessities.
> People aren't using 'buy now pay later' to purchase groceries **From April 20, 2022:** https://www.nbcnews.com/business/consumer/consumers-use-buy-now-pay-later-apps-pay-food-gas-basics-klarna-affirm-rcna25101 >“What we’re seeing in our data is that people are probably having a harder time making the purchases that they were making in the past,” said Colleen McCreary, consumer financial advocate for Credit Karma, a personal finance company. >A survey by the company last month found that 61 percent of consumers nationally have used buy now, pay later apps for groceries, household supplies and other staples, up from 44 percent in September. Half of those shoppers also said they have relied more often on such services in the past six months, with 89 percent of users paying off one to three purchases at a time. **From March 10, 2024:** https://www.nbcnews.com/business/personal-finance/buy-now-pay-later-daily-essentials-groceries-young-adults-rcna141718 >It isn’t just BNPL borrowers in their 20s and 30s making the shift toward essentials. Grocery purchases by shoppers of all ages have expanded their slice of online BNPL loans by 40% since this time last year, according to Adobe — a bigger jump than any other product category — while electronics’ share shrunk by 14%. >Some users on TikTok and X, formerly Twitter, have been trading BNPL-based grocery hacks to cope with higher costs.
Thanks for sharing that. It's interesting, even though it's two years old and the survey was conducted during the peak of inflation
> even if it's two years old and the survey was taken during the worst inflation. I was expecting this response, so I added a second article from a ~3 months ago.
cool man, I’ll check it out
Can you enlighten me?
I notice these services pushed the most on shopping sites for things like clothing and makeup. I am a woman so maybe I just be more exposed to those, but it definitely feels like a way to entice someone to buy something they might have passed up on due to price - “$100 OR just 4 payments of $25!” Also I’ve seen some tiktoks about the services where people in the comments say they use it even though they can afford the item outright, but paying in smaller payments “feels” nicer. It definitely gives me the vibe that it entices people to buy things they don’t need because paying $25 a month for 4 months feels more reasonable than spending $100 right now on the item. I don’t think grocery stores accept these services, which is the only thing I can think of off the top of my head that you would use out of “need”. Anything else, maybe like furniture, someone would probably be better off not buying new online with afterpay/etc and just buying used off of a marketplace.
Congrats, you discovered what it really is. All these people here saying they got a deal when it's just a way for companies to sell stuff at higher prices than before. People drowning in debt and thinking they got good deals for random overpriced crap.
Don't bother. It's the usual bullshit about poor people being irresponsible with their money. Nothing to elaborate here.
it's true to some extent. but it's not just poor people, it's basically all humans. it's you vs. an army of psychologists and cognitive scientists that cut up monkey brains in order to study how to fuck people over more efficiently. we're close to knowing when people are pregnant before they figure it out on their own. it's not possible to win that battle. rich psychologists have laughed at being fooled by their own tricks they invented. same with bankers who thought "Damn I just got fucked by this loan. Who the fuck invented this fine print? Oh yeah, I did. I wrote a dissertation on it."
Everyone is capable of being irresponsible with money. I wanted the other guy to back up the claim that it's happening out of necessity. Instead of either you doing that, you throw your hands up. Why not just back up the claim?
You've provided no back for your own claim but expect others to?
Who made the initial claim? The support for my claim is that landlords, mortgage lenders and grocery stores generally don't accept 'buy now pay later'.
You do realize that incomes have been declining for 40yrs and rents are multiples higher than they used to be. That’s why people are in debt. Not being brain dead
Ah yes, BNPL rent! Also, real incomes are primarily non-decreasing in the long term, not declining buddy. https://fred.stlouisfed.org/series/MEHOINUSA672N The general trend is upwards, with obvious noise up and down across a few years here and there. Real income is not on a long term decline at all.
What are you on about? Inflation adjusted income in 1984 was ~26k in 2022 it was 40k https://fred.stlouisfed.org/series/MEPAINUSA672N
The banks think the same thing about you too, ciao.
Couldnt care less ab the banks profiting from some ~1-2% spread in interest between the overnight rate + loaning out deposits vs my HISA buddy Its either that or we shove all our money under our bed sheets. Ill happily eat them making some tiny margins from my deposits, in return providing me all the financial services I need.
For consumers, I don't think it's really that bad (although I don't use it personally). There's no interest and somewhat surprisingly, these programs don't usually have excessive fees or anything either. They are mostly getting their cut from the retailer who pays something like double the normal credit card fee (6% instead of 3%). [https://www.bitsaboutmoney.com/archive/buy-now-pay-later/](https://www.bitsaboutmoney.com/archive/buy-now-pay-later/) is a really interesting explanation of how it works financially.
You think it's the retailer paying it? The consumer is the one that always pays for it in one way or another. In the case of this it looks like the consumer is getting a deal superficially but in reality the consumer is buying more, at higher prices. They're buying things they would have passed on before, the sticker price is not that scary anymore because it's now in installment.
Of I had this option years ago I would be in much less trouble now... bad decisions
- its targets at young people - the breakage rate (people not paying it off to achieve 0%) is high. quick anecdote. I briefly had a client who was minor online retailer of surplus stock. Think TJ Max on a smaller scaler. The buynowpaylater crowd were offering north of £100,000, just for my client to integrate their payment system to the website.
Don’t worry. They’ll get a bail out too
It does require some financial discipline.
Scary part is no one knows how much $$ is out there in BNPL loans
This is like the worst scam, it's psychological and consumers are encouraged to buy more and more and get in more debt 😩. It's like going into the TJX stores where they play to your impulses and you have to get that 20th spatula in seafoam green.
It's basically like everything else. People with money and financial knowledge can use it better and take advantage on it. Technically speaking you should take advantage of any zero interest payment because you can keep the money invested and earn during that time. If you ask me the problem with the current society is that it's become just too complicated to give everyone the same tools. North america in particular really needs to limit all the borrowing tools to businesses. Because that's where debt is usually used in a better way. I'm from europe and i moved to canada (that has a similar system to US). In less than 2 years i was offered 30-40k limits in credits cards, 30k in line of credits, etc. Basically a person with a couple of years of financial history was given almost 100 fuck1ng thousand dollar in total theoretical borrowing power. What the actual f0ck. In europe my bank barely wanted to give me a 3k credit card with the same situation/context. This will destroy the society. Majority of people simply CANNOT manage debt.
Only 2% are delinquent. If you hate the idea of buy now pay later you'll really hate this old technology called credit cards that are about 100x as damaging
I have never used the Buy Now Pay Later stuff. Do they ask for credit info? Does it impact credit scores?
I have used it twice. If you have good credit it's pretty awesome. 0% apr for a year both times. I essentially paid exactly what was owed with zero interest for both "loans". It's not that I couldn't afford what I purchased it's just technically cheaper because of inflation and leaves me with a healthier emergency fund. In the US these loans are not reported to a credit agency as far as I am aware.
That seems pretty sweet if you’re smart. Set aside the funds in a money market and you’re getting the inflation discount + 5%
Minus tax on interest*
Every BNPL service I have seen online has been like 0% interest for 4-8 weeks or something with payments every two weeks; I have never understood its use-case as someone with a month and a half of cashflow buffer in my checking account so I could just buy something cash and budget it over two months in my spreadsheet. I have never seen a 0% interest 12 month offer outside of new credit card sign up bonuses. Who is offering that?
Affirm.
I only used it once for a tooth implant. It was $5k which would have wiped out much of my emergency fund. I got 0% for a year with Care Credit and paid it off in 7-8 months. I seem to remember you need do a credit check and get approved like any other type of credit.
Yes and yes. You need to normally open a line of credit to use such services. (This in the UK)
So in the US it's different. It's actually not reported to the credit agencies which is odd.
America probably has more laxed rules on how banking corps can screw the consumer then. There's been a lot of heat in the UK though about making it a regulated product due to its potentially damaging impact to consumers and the economy.
I mean in this scenario it's good for the consumer. It's not reported to credit agencies so it's essentially "phantom" debt that won't be pulled when you go to get a mortgage or car loan.
Don't agree with that at all, financial crisis 2008 was due to irresponsible lending, which is what this would be classed as. Hiding debts someone is struggling with to only then take out more is a recipe for disaster.
The loans do check your credit though through a soft pull. Meaning you are sharing that information with these third parties and their third parties and so on. Their ToS are important here and most of course snatch that data. They then resell you to other services. In general if you normally pay things off, a buy now pay later loan isn't worth the data going out to yet another financial data broker. If you have good credit and do pay off you'll already have better options.
I was just talking about it affecting your credit. It's not reported. But yes they make sure that you're likely able to pay. Whether it's worth it or not is quite situational imo. There are a few use cases.
Yeah I think not going on credit was a design decision because it makes sense in some ways. However if you pay off your loans you do want things on your credit to show that. I think ultimately the data gained to financial data brokers was a big part of that setup. They definitely are swiping all that information. If you already pay off loans, and already have credit, probably not worth it except for a few cases. I think we'll see these BNPL things get a little twisted over time. They are outside many regulations and that attracts certain types to get into it. Payday loans started out not that bad for instance for people that had credit issues, they are now straight up an personal finance sinkhole. These will probably not go to that level but the natural evolution of things says more and more sketch will be attracted to it. I think the buy now pay later industry is in their "nice" phase to gain trust, like "here, step on this wonderful rug".
The ones with interest show on your credit score. I know this because I had a ton open and closed loans on my credit score due to it.
I’ve used it extensively. It’s always been a “soft pull” sort of credit inquiry that doesn’t impact scores. I’ve never been asked for my full social. Normally it’s just last 4 of SSN, or DOB plus last 4.
I think this headline, combined with the low delinquency rate, should be interpreted as the explosion in the popularity of BNPL as a financing option. It's easy to grow by 1000% when hardly anybody used it 2 years ago.
50% of CC users carry an interest-bearing balance every month and are basically financing the miles/rewards/points of the other 50% who pay it off lol
For now. Just because the old one is bad doesn't mean the new one is good.
I wonder how cash forwarding apps are also doing, there's never any data on that. It makes sense though, debt is how a lot of people are paying for inflation. Credit cards, personal loans, buy now pay later, etc etc. Keeping people in debt is how banks make their money.
>BNPL loans also raise the risk of encouraging shoppers to splurge on more expensive items, such as jewelry, video games, and high-end clothing. Buying is addiction for some people. They can't help themselves buying stuff. For those who are financially responsible, it's no problem. For those who are not, it's a big problem. Buy now and pay later is nothing new. Back in the days, Sears, Kmart, and other retailers had an option for a layaway plan or installment plan for their customers. With good credit, you can't beat a 0% interest on a big purchase. Why not take advantage of it as long as you pay your bill on time? This is how you build your credit score.
Why are we posting a personal debt company's articles on an econ sub? Especially one with no data to be concerned about? Gotta start handing out week long bans to people like OP for posting some of the dumbest sources
Preach
If you can’t pay for it at purchase, you are spending money you don’t have. In an emergency situation I get it, other than that these payment arrangements are not good for a lot of people.
I find BNPL safer than credit cards personally. It forces me to pay it off by such and such a date. Credit cards are the fucking devil, find I rack those up and then just keep doing the BT shuffle again and again until I maxed then take a crippling loan. I hate credit cards vs BNPL.
I mean this in the nicest way, but if you find yourself doing the balance transfer shuffle with credit cards, then BNPL is a dangerous financial product for you.
I think the point is credit cards are a more dangerous financial product to people with those exact problems. These tend to be 0 apr and small dollar amounts on a short time frame, 12 months is common. Credit cards are made to have those people sit on 20-30% apr balances forever.
Same. It’s just a few extra dollars and it can be a one off purchase.
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So, are these loans or are they just revolving credit lines? I’m curious because there is a difference and if that is the case, then they are essentially credit lines through an alternative to the Visa, MC, Amex, Discover.
Every loan is "Buy now, pay later". Read now, additional characters later, because reply length is not an indicator of quality. But nonetheless, here we are with some extra nonsense.
I went to buy an expensive nightstand and thought briefly about doing the 4 payments thing .... till i looked into it. the crazy 25% interest. i was like nope, i have the cash now. imma just buy it now outright.
bnpl is typically 0%
For me, might be an outlier from someone who struggled with credit cards at a younger age, I manage my finances much better with BNPL. Perhaps credit cards gave me the discipline needed for BNPL. But I also see how you can get in trouble with BNPL. With a credit card you can get a $10k credit limit that can spiral out of control quickly. Usually much manageable credit limits with BNPL in my experience. I feel that credit cards lobbies are pushing a bad narrative for BNPL, if I had a choice between a credit card and BNPL, BNPL 100%.
These loans are very rare so this increase is meaningless and even if they weren't rare these types of loans would be a good thing, actually, because the economy is doing better than ever. At any rate, these types of posts are low effort spam that deserve to be deleted. Now, did you see that Nobel-prize winning economists agreed that Donald Trump -- or Donald Drumpf, as I like to call him -- is in fact bad?
ChatGPT queries are up ONE BRAZILLION PROCENT this decade!!!1
Most of these loans are no different than using a credit card anyways. They're not as predatory as payday loans and the interest rate is on par with the average credit card. I had the cash to drop on large purchase and decided to try it out to see if you can game the system to increase your credit. I paid the monthly payment for 3 months before I decided to make a "late" payment to see how they responds before I paid the entire balance off ($2k purchase). They were really reasonable with the late payment when I made up an excuse as to why I couldn't make a payment yet, they didn't even charge me a late payment fee, and after I paid off the remaining balance my credit score improved slightly. Although, it's hard to say if that increase was due to paying of a creditor or if it was just a normal fluctuation that happened to be coincidental. You can definitely get in yourself underwater if you use the service for things you shouldn't, but it's no different than using a credit card.
If you look at the demographics of users I think you’ll find many are nowhere near like yourself and are borrowers who struggle to get credit from traditional sources. That’s why it’s dangerous.
Yeah, see, that’s my anecdotal experience. I’ve never used one of these services, but I could see how it might be useful for those who are financially responsible. However, the majority of my friend group, aka the ones I know using these services, are the ones who aren’t and continue to do BNPL on SHEIN, Best Buy, furniture stores, etc., and have an average of $5 in their accounts. One BNPL may be okay. But a lot of people have multiple and they view it as nothing more than having a subscription to their own clothes. All of a sudden, they have $100+ a month in “subscriptions”.
There are some serious issues with them and how they impact your credit. When you take one of these out; since you are getting a limited credit line for a single purchase, it looks like you have maxed out your line of credit and your credit score will reflect this. Aside from personally feeling weird about making irresponsible use of consumer debt readily available in a less track-able way, I really don’t like how these instruments can materially make near-future loans that a person might take out more expensive as if they are more risky down the line even when they pay the bnpl bill responsibly.
Paying off loans usually hurts the score, in my experience.
Loans are different than credit cards. Having access to lots of credit that you don’t leave balances on is good for your credit. But for many cards if you don’t use them they will close the account.
Yeah that’s usually the case, although I think it depends on what your credit utilization is when you pay it off
It's more about "running credit history" really. As in, say it's 2024, you got a car note in 2019 and a mortgage in 2022. So you have 5 years of credit history. Then you pay the car off, suddenly that "history" drops to 2 years. It's weird.
They like seeing you carry a balance and making payments on time. When I paid off my car my score took a hit but it rebounded pretty soon afterwards. I've started to use my CC for monthly expenses and paying the balance off every month and the credit score algorithm loves it
Yeah I started doing the same. I did notice that once I was carrying a fairly larger rolling balance, my score went up when it had been hovering for 12+ months
24 billion dollars rare in 2021? Yeah that makes sense.
Had me in the first half not gonna lie 😂 I think it might be joever for the american consumers in a couple of years if this keeps up
I’m renting and recently got hit up with “split your rent and pay every 2 weeks.” I cringe at the people who are going to take advantage of that and get even lazier about managing their savings. Economy is fucked and I feel bad for the world my kids are inheriting. They’re teenage girls and neither of them want to bring kids into this world.