ECON "Buy Now, Pay Later" Mania Sends Americans Deeper Into 'Black Hole' Of Debt

[Blacknarwhal]

Thought delinquent car payments were bad? How about delinquent grocery payments?

Fair use cited so on and so forth.

"Buy Now, Pay Later" Mania Sends Americans Deeper Into 'Black Hole' Of Debt | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

"Buy Now, Pay Later" Mania Sends Americans Deeper Into 'Black Hole' Of Debt​

by Tyler Durden
Friday, Apr 21, 2023 - 08:40 PM

Americans are drowning in credit card debt as elevated inflation makes the cost of living unbearable. About 70% of consumers are financially stressed, which means ones who've maxed out credit cards and drained personal savings amid 24 months of negative real wages are now resorting to "buy now, pay later" (BNPL) apps for basic items like groceries.

Bloomberg spoke with Faith Smith, a 34yo administrative assistant that is financially stressed, who said she couldn't resist when retailer Target Corp. pinged her email with the ability to BNPL.

Smith said she spends upwards of $500 per month on groceries. She said she already uses BNPL apps to purchase clothing and school supplies for her young daughter, but when the option came up to use it for groceries -- she said it was a no-brainer:

"It helps for a week or two, but then you're stuck with a grocery bill for a couple of months."

In the last several years, consumers have been addicted to the BNPL apps such as Afterpay, Affirm, Klarna, and PayPal.

Almost half of Americans have used BNPL apps, and of those, about 1 in 5 rely on such apps to buy groceries, according to a recent survey from LendingTree Inc. Some 27% of users use the loans as a bridge to their next paycheck. -- Bloomberg

According to Consumer Financial Protection Bureau, BNPL surged during the pandemic, with five of the main US lenders originating $24.2 billion in 2021, up from $2 billion in 2019. The payment method is an attractive alternative to credit cards, with elevated interest rates.

Source: Bloomberg

The popularity of BNPL will only soar from here as CNBC's Financial Confidence Survey found most Americans are living paycheck to paycheck. Inflation, economic instability, and a lack of savings led to 70% of respondents indicating they were stressed about their personal finances.

However, the convenience of BNPL and spreading monthly payments out for a predetermined time, if it's just a few months or several years, can lead to a financial disaster if consumers miss payments, as this would mean late fees would pile up and credit scores would drop.

"You are putting yourself into the cycle of debt that would be very difficult to get out of," says Terri Bradford, a payments specialist at the Federal Reserve Bank of Kansas City.

LendingTree showed nearly half of the consumers are using BNPL for clothing, shoes, and accessories. About 21% are using it for groceries.

Source: Bloomberg

We expect an increasing number of financially stressed consumers will be tapping BNPL for groceries and basic items as macroeconomic conditions continue to sour.

 

[momma_soapmaker]

What could possibly go wrong with that.

/sarc

 

[Griz3752]

My issue is it's generally not people like us creating or benefiting from this new rash of spending. The bulk of what I see is blatant distribution of freebies in support of the Marxist Agenda of the day plus of course the usual pissing away of "free $$$" by the bulk of the social strata most likely to receive said freebies.

 

[Redleg]

This is what happens when you encourage the "I want it now" age group.
Everyone on this site was raised with save to buy it. At the least think hard if you really need that shinny new thing.
Well, we know who the debt slaves are going to be in the not so distant future.

 

[billet]

You just can't fix stupid!

 

[Blacknarwhal]

This is what happens when you encourage the "I want it now" age group.
Everyone on this site was raised with save to buy it. At the least think hard if you really need that shinny new thing.
Well, we know who the debt slaves are going to be in the not so distant future.

...you know the article's talking about groceries, right?

Should they just eat ze bugs und be happy, Klaus?

 

[Voortrekker]

A single mother and no photos, so she has a mongrel kid and no husband...what could go wrong?

"Smith said she spends upwards of $500 per month on groceries. She said she already uses BNPL apps to purchase clothing and school supplies for her young daughter, but when the option came up to use it for groceries -- she said it was a no-brainer:"
(Well, you could say that again)

Coming up the ranks of minimum wage, rent, food, car were the priorities, stuff was what other people had.

 

[summerthyme]

...you know the article's talking about groceries, right?

Should they just eat ze bugs und be happy, Klaus?

Well, yeah... but I'm betting they haven't cut out all the  other "wants" before resorting to BNPL. And i also bet they aren't buying rice and beans for the majority of their protein needs...

Using BNPL for a predictable, recurring expense is absolutely the fastest way to bankruptcy. The ONLY possible prudent use would be if you are one or two payments from having a major purchase paid off (mortgage or car), and you will be able to not only start paying cash again for groceries, but will also be able to pay off your grocery debt on top of that.

Otherwise, bankruptcy is inevitable.

Summerthyme

 

[Blacknarwhal]

Well, yeah... but I'm betting they haven't cut out all the  other "wants" before resorting to BNPL. And i also bet they aren't buying rice and beans for the majority of their protein needs...

Using BNPL for a predictable, recurring expense is absolutely the fastest way to bankruptcy. The ONLY possible prudent use would be if you are one or two payments from having a major purchase paid off (mortgage or car), and you will be able to not only start paying cash again for groceries, but will also be able to pay off your grocery debt on top of that.

Otherwise, bankruptcy is inevitable.

Summerthyme

Likely true, but we've got no way to know. After all, she's GOT a job. She's working. So why isn't work covering basic food? She may not be down to beans and rice and a scurvy diet, but she's definitely not buying lobsters and caviar.

Though she probably should have figured that BNPL on a recurring expense wasn't going to help much. The problem would only kick up again a few weeks later.

 

[ShadowMan]

There are many ways to become a SLAVE.....and debt is one of them. So very easy and enticing. BTDT got the T-shirt. I love being debt free and what we have WE OWN outright! I hope everyone here can someday achieve that freedom.

 

[onmyown30]

I have had people beg me to add the shop pay installment option at my website. They want to pay over time instead of one payment. I wind up paying more on fees but I am getting more sales. And sales have been sooooooo slow last couple months. I’ve sold online for over 21 yrs and this is the worst it’s ever been

 

[phloydius]

We have actually started to use the BNPL on a few things that we were going to buy anyways that are in the $500 - $1500 range. As an example, a replacement laptop.

We opened a new bank account (that is paying a 5.02% interest rate currently), and when we buy something with BNPL we transfer some of our digital-FRN units to that account and setup auto pay for the BNPL (which most require). We then earn the 5% APR on the money we spend on the BNPL, which really is not much but "every little bit helps".

This is sort of a test, not sure if we will keep doing this or not. It may not be worth the trouble.

 

[magnetic1]

I have 2 items on 2 different cards that I am paying on interest free for a few months. The money is available if I need to pay off those cards but right now the set up is I earn some back on it where it is and use the store money free as there is no benefit to paying cash up front. Between the 2 accounts, the totals are minimal and both are for things I was buying anyways. For me that works. I don’t carry balances otherwise.

 

[Ragnarok]

Self-Checkout Kiosks At 4,500 Walmarts Now Offer 'Buy Now, Pay Later' Loans For Basic Items​

"Buy now, pay later" (BNPL) loans surged in popularity during Black Friday and Cyber Monday in late November. As Christmas is less than a week away, Walmart shoppers have been greeted with a new BNPL payment at the checkout line. The increased use of BNPL is incredibly problematic for consumers with insurmountable credit card debt and depleted savings.

Affirm Holdings announced Tuesday that its BNPL service has been expanded to self-checkout kiosks at 4,500 Walmart stores nationwide. Customers can purchase electronics, apparel, toys, and many more items (except groceries) by spreading payments out from three months to 24 months.

"Recent Affirm research revealed that more than half of Americans (54%) are looking for retailers to offer a buy now, pay later option at checkout. Moreover, we've found that 76% of consumers would either delay or not make a purchase without Affirm," said Pat Suh, Affirm's SVP of Revenue.

Suh continued, "Expanding our partnership with Walmart and bringing Affirm's transparent monthly pay-over-time options to their self-checkout kiosks in the US will help even more consumers increase their purchasing power during the holiday shopping season and beyond."

A number of government agencies and even the central bank of central banks (Bank for International Settlements) have warned about the BNPL craze.

Last month, the US Office of the Comptroller of the Currency (OCC) - the powerful federal banking regulator - sounded the alarm over increased usage of BNPL.

OCC warned about the overuse and poor understanding of the BNPL payment structure that could lead to disastrous outcomes for consumers if payments are missed.

A report published earlier this month by the Bank for International Settlements said BNPL is mainly being used by young adults, particularly those with low education and maxed-out credit cards.

Other major retailers might follow Walmart's lead. It's never a good sign when retailers expand the purchasing power of broke consumers.

Self-Checkout Kiosks At 4,500 Walmarts Now Offer 'Buy Now, Pay Later' Loans For Basic Items | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[Elza]

The only time we used something like this was several years ago when I bought a new Exmark zero turn mower. It was a special deal offered by Exmark. 42 months to pay. Zero interest PROVIDED you were never late on a payment or go over the 42 month mark. We paid well in advance each month and paid it off in 36 months just to be on the safe side. I still wonder how many people got slammed with all of the back interest. I forget the interest rate but it was stiff.

 

[West]

You just can't fix stupid!

Quote...

"Smith said she spends upwards of $500 per month on groceries. She said she already uses BNPL apps to purchase clothing and school supplies for her young daughter, but when the option came up to use it for groceries -- she said it was a no-brainer"

Stupid is a no brainer!

 

[Murt]

Quote...

"Smith said she spends upwards of $500 per month on groceries. She said she already uses BNPL apps to purchase clothing and school supplies for her young daughter, but when the option came up to use it for groceries -- she said it was a no-brainer"

Stupid is a no brainer!

because tomorrow never comes

 

[Jeff B.]

Credit is like fire. Useful but dangerous. Like many others here, we’ve gone through the period of overusing credit and then having to work it down and away. It’s much easier to incur debt than to retire it, isn’t it?

I agree that targeted, specific use of credit often makes sense, but only when you’ve got the wherewithal to eliminate it either immediately or very quickly.