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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

#111

Post by CyanLite2 »

sbuccini wrote: post #71

I posted this before, will post again: This article is so weak. It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. Seriously quotes TikTokers who are probably just paid shills for the company. There are real issues with BNPL, mostly extremely loose underwriting in the pursuit of growth, but realistically it's functionally no different than a credit card. P…

BNPL is just a non-asset-backed sub-prime loan. We've seen this movie before and how it ends. BNPL firms can't survive a recession or higher consumer delinquencies.

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

#112

Post by vageli »

strken wrote: post #60
Dalewyn wrote: post #42

Earlier quoted context omitted.

>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 car…

If everyone only spent money they had with a credit card, then credit cards would not try to lure you in with free stuff and there would be no reason to use one. I pay my balance on time and "enjoy" "many benefits" derived from the human suffering of the people who weren't rich or sane enough to do so.

Credit card companies make money regardless of whether or not customers carry a balance due to interchange fees.

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

#113

Post by jerf »

alexjplant wrote: post #103
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 always see articles like this and wonder what the big deal is... I frequently use PayPal Credit, store credit cards, and Affirm on larger purchases because I like being that much more liquid. Then I realize that I always use the 0% APR option and that I've paid exactly $0 of interest to all of these services. I couldn't imagine paying 12% APR for the privilege of owning a $1400 synthesizer much less for a delivery…

"I like being that much more liquid"

There's "I use debt to buy things I can't afford", there's "I don't use debt to buy things I can't afford", and then there's "Yeah, I could totally drop cash on this but I'm going to take 0% debt just to avoid the liquid drain". If you're in that third category, you're just too far away from the first one to understand it very well. (In self discipline, not income. There's no amount of income itself that keeps you out of that first category!)

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

#114

Post by evrydayhustling »

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…

In America, the psychology and boom-bust cycle around every form of credit is really influenced by inequality.

Step 1: Create cashflow problems for poor people by delaying pay, but frontloading unexpected expenses (healthcare, education, repairing a broken car that gets you to work), making alternatives incredibly overpriced (renting vs owning a home), and adding extra fees for late payments overdrafts and similar. ("Being poor sure is expensive." [1])

Step 2: Expand access to credit in the name of equality. Sub-prime and aggressive lending products help people who are living inefficiently make better choices like buying a house, taking that job in the next town, getting a degree etc etc!

Step 3: New markets always mean (a) bigger interest rates being promised upfront, (b) borrowers who are less experienced with credit and (c) lenders who don't really know the nature of risks in he new market. This is a huge opportunity for middlemen to create products that are exploitative to the borrower (sandwich financing), to the lender (CDOs full of NINJA mortgages), or both -- so folks show up to do just that.

[1] https://finmasters.com/cost-of-being-poor/#gref

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

#115

Post by rcxdude »

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.

Is this true? This article suggests the opposite, banks lose money overall on everything credit-card that isn't interest payments, which make up the vast majority of their income. https://www.valuepenguin.com/how-do-credit-card-companies-ma...

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

#116

Post by jacobsimon »

sbuccini wrote: post #86
ceejayoz wrote: post #76

Earlier quoted context omitted.

> It doesn't provide any actual reasons for why BNPL is a bubble nor why such a supposed bubble is about to burst. I'll provide one: it only made any significant sense in the near-zero interest rate levels we had last year. "Split it into four payments for $0 fee" is attractive. Much less so when there's a fee; Amazon's BNPL via Affirm is now up to 10-30% APR from the previous 0%. At those rates, people just put it o…

Your claims are not true for several reasons: - Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer. The merchants are in charge of making that decision, not Affirm. Affirm earns interest on every loan. Many merchants choose to assume that cost because it greatly increases conversion rates. Replies to my comment only confirm this fact (“I only ever used BNPL cau…

> Whenever you see a BNPL offer for 0% it means the merchant is paying the interest on behalf of the consumer.

I don’t think this is true - the merchant pays a transaction fee (around 3-5%) with companies like Affirm or Klarna, which is not much different than typical credit card fees. The merchant is not paying an interest rate or liable to pay more if the customer fails to pay on time.

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

#117

Post by turdprincess »

t0mas88 wrote: post #44
geraldwhen wrote: post #28

Earlier quoted context omitted.

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 c…

I’m not sure about relative fraud numbers, but the fraud refund differences are real. With a credit card they will refund you basically no matter what. With a debit card it’s much more hit or miss - I recently had 3 fraudulent transactions on my debit card for about $100 each and they refunded only one of them.

That’s crazy if you think about it - you give your card around to many people and any of them can write it down and use it.

In the US the only sensible thing to do is to use your credit card for everything and keep your savings tucked in an account which doesn’t have a card at all, nor a checking account tied to it. Then maybe a small checking account at some other bank for rare times you need cash.

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

#118

Post by mindslight »

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…

No, Americans are never sung that song, nor are we taught that debt is a bad thing, nor are we generally taught to save money by doing things like fixing our own cars. The societal focus is on maximizing income in your narrow employment, so that you can just buy new things and otherwise push your problems onto someone else.

And unfortunately, due to the overwhelming monetary inflation of our economy (which would otherwise experience strong price deflation due to technology and offshoring), taking on more debt is actually economically advantageous - you get to capture more of the classy handout that is the asset bubble.

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

#119

Post by albedoa »

dusted wrote: post #63
mschuster91 wrote: post #24

Earlier quoted context omitted.

> "But old cars break down and are expensive to get repaired" Yes, but you don't have money to pay someone else to repair it, old cars have cheap parts and are relatively simpler to repair, learn how to do it, you're not in a position to be fussy about what skills are beneath you if you can't pay someone else to do it, stop thinking so highly of yourself and get to it! You're ignoring the "boots theory" [1]. A new or…

I'm not entirely ignoring it, but I don't believe it holds true for things like cars. I've driven bangers my whole life, I mean really driven them to death, some to the point where they die on the highway, and I will do a quick inspection to decide whether I want to fix that or just have it towed direct to junk. Now, cars are insanely taxes in Denmark, near 300%, and they lose about half their value the first year of…

> it's been my experience that it almost never happens that a freshly inspected car fails randomly within the two years until next inspection.

Even though you describe the number of yours that have died on the highway as "some".

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

#120

Post by dylan604 »

__alexs wrote: post #69
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? I put a (vegan) sausage roll from Gregg's on Monzo Flex the other day...

And when you miss a payment, what do they repo?
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