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The 'buy now, pay later' bubble is about to burst

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Re: The 'buy now, pay later' bubble is about to burst

#31

Post by Dalewyn »

christkv wrote: post #15
yladiz wrote: post #11

Earlier quoted context omitted.

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

I think the argument is that its easy to get out of control and leave yourself exposed. If you have discipline then I don't see any problems. I might behov the industry to be forced to do more stringent credit checks before allowing it either by law or regulation.

I have no sympathy for adults (important distinction!) who have no discipline with their finances. They aren't children who literally don't know better.

Those who do have financial discipline should not be inhibited for the sake of those who do not.

Besides, /most/ cases of financial ruin aren't literal death. They are generally just very expensive and horrible-to-go-through life lessons.

Re: The 'buy now, pay later' bubble is about to burst

#32

Post by kortilla »

crote wrote: post #4
senttoschool wrote: post #2

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, incl…

Don't forget that there is no such thing as a free lunch, though. Credit card companies aren't charities! In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices. Furthermore, their goal is to normalize the use of credit cards, in the hope that you'll eventually stumble and get screwed over by the interest fees. Also, I think y…

> Also, I think you are forgetting that Gen Z are literally kids.

You might want to check out your math on that one.

Re: The 'buy now, pay later' bubble is about to burst

#33

Post by mschuster91 »

gizmo wrote: post #9

The BNPL bubble burst in 2021 and it's been rapidly downhill since. Turns out that giving people free payment plans for everything only makes sense in a world with 0% interest rates. Who's surprised this blew up? Nobody hopefully.

> Turns out that giving people free payment plans for everything only makes sense in a world with 0% interest rates.

It makes sense even in a world of higher interest rates, at least for high-value goods - especially cars. Most car manufacturers have their own in-house banks and with these, direct access to the capital markets. For the manufacturer, it makes more profit to sell a car immediately after it is manufactured and have the income immediately on the books as well (as the in-house bank directly wires over the funds), simply because storing a car costs money for whatever storage option is used, for transferring it in and out of storage, and not to forget cars also lose value when stored over time, as many manufacturers are finding out at the moment as they try to complete the build of all the cars that had to be stored away during the lack of chips era.

Even for lower-value goods like cameras, phones and drones, this calculation applies, just without the in-house banks. When a piece of tech costs at least 600$ to manufacture and you can estimate a demand of tens of thousands of units (or hundreds of millions in the case of Samsung and Apple flagship phones), they absolutely need to push as much inventory as they can, simply because they are otherwise sitting on a very expensive time-bomb: once the next generation comes onto the market, the old generation stock will only be sellable with significant discounts.

Re: The 'buy now, pay later' bubble is about to burst

#34

Post by ivanche »

yladiz wrote: post #11
ivanche wrote: post #10

Earlier quoted context omitted.

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

If you take 12 payments you, by definition, are in debt! It seems you are conflating debt with net worth - a person can have positive net worth and still have debt(s). Even if it is 0% interest you owe money to someone. Every debt is a risk. It may be smaller or larger, but it's a risk. It also normalises the behaviour of going into debt for buying depreciating objects which is bad by itself.

Re: The 'buy now, pay later' bubble is about to burst

#35

Post by Ultimatt »

ivanche wrote: post #10
yladiz wrote: post #7

Earlier quoted context omitted.

I think this is a bit too simplistic of a way to look at it. Having sone debt is not necessarily bad, even outside of enormous purchases such as a house or car. First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. Second, in general it's not as…

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

Or you can afford the camera outright, right now. What's better out of these options:

1) Buy for cash the camera now. You don't have any cash in hand afterwards, and the camera is depreciating in value immediately as an asset only offset by whatever you do with it.

2) Buy via BNPL with no interest for 12 months, and pay exactly a 12th a month. You have the camera, but you also have 91% of your cash in the bank that /does/ get interest or can be used for anything else like investing in shares. You still have liquidity and can assumedly use the camera to generate some cash doing weddings or whatever as part of your hobby for one year.

3) Save cash where you are getting similar rates of interest as 2 for 12 months once you've identified you need something. Buy the camera a year after you needed it, you have lost the opportunity of 12 months revenue from maybe one wedding a month? The price is either affected by inflation after a year, or more hopefully its gone down due to competition with other models, but who knows. Also do you still need a camera? you've certainly lost out on a years experience to know if it was worth it.

BNPL makes plenty of sense if you can or cant afford something, more so if you can.

Re: The 'buy now, pay later' bubble is about to burst

#36

Post by onion2k »

yladiz wrote: post #7
dusted wrote: post #3

I don't get it.. There's a childrens song in Denmark, it's lyrics go, roughly translated "and if you have money, then you can have, but have you none, then you may go!" (it's about buying bread at the bakery).. When I see how people spend money they don't have, I'm always wondering if their parents never sang for them when they were young, or if they are of a particular dim nature. Sure, I can see why some people wou…

I think this is a bit too simplistic of a way to look at it. Having sone debt is not necessarily bad, even outside of enormous purchases such as a house or car. First, c'mon, people don't (directly) finance sandwiches. Have you ever seen a sandwich shop accept Klarna? If you're talking about a credit card that's something but that's not what this article is talking about, which is BNPL. Second, in general it's not as…

Back in my twenties I bought a car using a 5 year 0% interest loan from the dealer. I had the cash in the bank to buy it if I'd wanted to, but interest rates were around 7% at the time so using the 0% loan effectively gave me a 15% discount because I got to earn the interest on the value of the car instead of the dealer.

Managed debt is fine. It's only an issue if you over-extend yourself or you have a catastrophic change in circumstances (and you can insure your debt against that...)

Re: The 'buy now, pay later' bubble is about to burst

#37

Post by Vespasian »

yladiz wrote: post #11
ivanche wrote: post #10

Earlier quoted context omitted.

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

There is nothing inherently wrong with that but it's a lot more risky then saving up.

Say after 10 months an unavoidable bill of $4k shows up and I got to pay it. If I'm saving up I can redirect that money. It sucks that I don't get the camera when I planned to but otherwise I'm fine.

Under a BNPL plan I have no extra money to allocate and might have to dip into Credit (potentially with high interest).

In short: Savings are fungible, payments are not.

Studies show that huge percentage of the population doesn't have any savings. For them it's particularly dangerous to have more recurring bills.

Re: The 'buy now, pay later' bubble is about to burst

#38

Post by Ultimatt »

kortilla wrote: post #26
yladiz wrote: post #11

Earlier quoted context omitted.

Okay, I repeat my question above: if you can afford to pay over 12 months (meaning, you don't go into debt to do so), what's inherently wrong with doing it instead of waiting 12 months and paying all at once, besides ideological reasons?

It’s financially reckless. What if you lose your job?

You then pay off your outstanding debts if you think there is risk you will be paying out more in the near term... That's why you only carry debt when you could otherwise afford something. Literally thats the point. Realistically though its even better if you lose your job because you have the cash in the bank you would otherwise have sunk into an asset. I just quit my job to be self-employed and have a bit of a career break. Before I did I got a 24 month interest free credit card. If I suddenly have to pay for something really expensive like a new boiler or something, I can put it on there and I have two years to decide what to do, or get a job with zero additional cost. That's security more than it is a liability. I've had a perfect credit score and never paid for credit other than my mortgage interest. People who refuse to use credit out of some broken parental advice of "never carry debt" is far more reckless since you're ignoring an entire avenue of financial management for yourself. Absolutely don't carry debts you cannot afford. But everyone should abuse the fuck out of the credit system, and the institutions designed around fleecing people a lot stupider than you. The bar for credit company profits is set at people where money is like water through their hands, not people who know how to keep a personal budget in a spreadsheet.

Re: The 'buy now, pay later' bubble is about to burst

#39

Post by ivanche »

cjrp wrote: post #16
ivanche wrote: post #10

Earlier quoted context omitted.

If you can afford 12 payments with interest, you can by definition also afford to save for 12 months and then buy the camera. BNPL and credit card companies are masters of exploiting psychology and especially currently prevailing wusiness and entitlement ("But I want it now!!!1!", "I deserve to treat myself like a king").

If there's 0% interest, you might be better off buying the camera now rather than in 12 months when the price has increased.

Fair, that could happen. It could also happen that the price decreases, as prices for electronics tend to do.

Re: The 'buy now, pay later' bubble is about to burst

#40

Post by Dalewyn »

senttoschool wrote: post #2

“We found that most of the people that use buy now, pay later either don’t have or don’t use a credit card,” Marco Di Maggio, an economist at Harvard, told me. He said that Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. This is always weird to me. It makes sense why Gen Z does this. But weird. I can get 2-4% back on all my purchases using my credit card, incl…

I feel that an astonishing number of people simply don't understand how credit and credit cards work, don't put in any effort to learn (understanding credit and debt is a critical life skill), and consequently blacklist what is unknown from their lives (eg: the Gen Z example).

People falling into financial ruin isn't a fault of credit cards or carrying debt, it's either driven by fiscal irresponsibility (which can be rectified with honest effort) or just plain bad luck (which can happen to anyone, fiscally disciplined or otherwise).

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