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

theatlantic.com

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

#41

Post by Arnt »

desas wrote: post #19
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…

> 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. In the UK, Deliveroo (a food delivery company) will let you pay by Klarna for orders >= £30, including from sandwich shops. Here's the press release: https://www.klarna.com/international/pr…

Paypal offers me a pay-later option, apparently no matter how small the amount is or what I'm paying for. Sometimes two options (pay everything next month + pay in instalments). Or perhaps it's alwys two? I haven't really paid attention.

The next-month option is free (for me) anyway. I assumed that the risk of a one-month loan is low for Paypal and worthwhile because it takes a few transactions from the other payment processors usually offered by the same webshop. But that's just an assumption.

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

#42

Post by Dalewyn »

strken wrote: post #30
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…

It's a hateful little piece of plastic. You carry it around in exchange for 2-4% cashback and fraud protection that should by rights apply to debit cards too, and the credit card company sits there hoping you give in to temptation and actually use the line of credit it represents, at which point they charge you usurious rates and distribute part of their loot to all the other poor schmucks they're conning. I have one…

>at which point they charge you usurious rates

If you pay the statement balance due instead of the minimum payment due on your statements, you will end up paying no interest.

The sky high interest rates only apply to statement balances that go past due, and having past due debt is also strongly disincentivized because they are horrible for your credit score.

If you only spend money you actually have with a credit card, you will be fine while also enjoying the many benefits of having and using a credit card.

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

#43

Post by ivanche »

Ultimatt wrote: post #35
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").

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 /…

If we are to make up scenarios, I can take $5,000, go to a casino, observe roulette wheel and bet on black when I notice bias. Bam, I now have $10,000! I am the smartest guy ever!

Seriously, OP never mentioned investing in a business equipment but wanting a camera. Also, that camera will depreciate no matter how you paid for it, but you conveniently mentioned it only in the scenario 1.

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

#44

Post by t0mas88 »

geraldwhen wrote: post #28
dbbk wrote: post #17

Earlier quoted context omitted.

I'm 30 and never had a credit card. Always felt like an extra layer of complication I don't need. I have enough money, I'd prefer to directly spend it. With a credit card there'd always be a nagging feeling some payment would be missed or something would go wrong and all of a sudden I'd be hit with interest charges.

This is wild. Have you never had a fraud charge? Reversing fraud of any size takes minutes at most with a credit card. With a debit card you might just lose the money.

This is a very US specific thing and even there I'm not sure it's true.

In Europe credit-card usage is much lower, and card security is much higher for both types of cards. We've had chip and pin protected cards for many many years, while the US only caught on in the last few years.

Is there objective data that US debit cards have more fraud impact for their users? Or is this really more a PR story from credit card companies?

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

#45

Post by dividedcomet »

geraldwhen wrote: post #28
dbbk wrote: post #17

Earlier quoted context omitted.

I'm 30 and never had a credit card. Always felt like an extra layer of complication I don't need. I have enough money, I'd prefer to directly spend it. With a credit card there'd always be a nagging feeling some payment would be missed or something would go wrong and all of a sudden I'd be hit with interest charges.

This is wild. Have you never had a fraud charge? Reversing fraud of any size takes minutes at most with a credit card. With a debit card you might just lose the money.

I’ll say I’ve never had this issue with credit unions I belong to. Just give the fraud department a call and within maybe half an hour the money is back in my account

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

#46

Post by ericfrenkiel »

geraldwhen wrote: post #28
dbbk wrote: post #17

Earlier quoted context omitted.

I'm 30 and never had a credit card. Always felt like an extra layer of complication I don't need. I have enough money, I'd prefer to directly spend it. With a credit card there'd always be a nagging feeling some payment would be missed or something would go wrong and all of a sudden I'd be hit with interest charges.

This is wild. Have you never had a fraud charge? Reversing fraud of any size takes minutes at most with a credit card. With a debit card you might just lose the money.

In some ways it's even more expensive to remain "credit invisible" because of the security deposits now needed when you set up utilities, getting a mobile number, applying for an apartment rental, etc.

Building up a strong FICO score is the easiest thing with the exact mindset of OP with effectively the same amount of friction thanks to the "miracle" of autopay.

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

#47

Post by mrjin »

It's virtually a credit card service issued without neither a foregoing credit check nor a physical card except that with a lower credit limit.

For people with enough financial capacity, it provides little value in comparison with credit card as they still have to pay the same amount but have to go through much more hustle. So, it's not attractive to those unless there were considerable incentives such as cashbacks.

But on the other hand, for those barely can make ends meet, it might be the only way to get something they want desperately as obviously they are highly unlikely to get a credit card or a personal loan. If something goes sideway, bad debts are most likely to occur.

For the merchants, if with the extra fees they still can make a profit, then they would be pretty happy to accept it as they get some extra sales which are unlikely to happen if no BNPL available.

For the BNPL providers, they can be there in the first place was because there was way too much cheap money in the market which had nowhere to go. So, if they can get enough customers and revenues quickly enough by providing considerable incentives, they can continue to get more and more investments. And if they can get to IPO stage, they can get more money by bumping up the share price by which the initial investor can exit with huge profits. Such game had been played for decades as so much money were printed from thin air.

Now things changed drastically as cheap even free money is no more...

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

#48

Post by SaintGhurka »

dbbk wrote: post #17
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'm 30 and never had a credit card. Always felt like an extra layer of complication I don't need. I have enough money, I'd prefer to directly spend it. With a credit card there'd always be a nagging feeling some payment would be missed or something would go wrong and all of a sudden I'd be hit with interest charges.

You have me curious. What payment methods do you usually use? I just envision a life without credit cards having a bit of extra friction once in a while.

Do you ever run into transactions that can't be completed with alternate payment methods? For example, I used to see hotels state that they only accept credit cards (and explicitly exclude debit cards) for checking into a room.

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

#49

Post by Dalewyn »

andrewaylett wrote: post #23
Nextgrid wrote: post #6

Earlier quoted context omitted.

> I've always paid the full amount every month. Does Gen Z lack this discipline? I'm not sure it's a Gen Z thing - credit cards were always subsidised by those who "lack the discipline". If everyone paid on time all the time they wouldn't give anyone an interest-free period.

Banks primarily make money on interchange fees, rather than interest -- if everyone paid on time all the time then they'd be very happy.

And in fact the banks (to include credit card companies) do love people who pay on time every time by giving better credit scores to the people who do.

Meanwhile, people who only pay the minimum due end up carrying past due debt and get bad credit scores from the banks. A bad credit score in turn means the banks won't lend money as much or as easily to such people.

The ideal debtor is one who carries debt and proceeds to pay it off on time every time. You will have a stratospheric credit score and banks will be begging to lend you money.

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