This entire thread is focussed not on BNPL, but whether the entire concept of consumer debt makes sense.
Some folks say consumers should never take on debt for purchases, when they can save up instead. Others point out that it’s unavoidable in some cases. You may need a car to get to your job, meaning the asset you purchased creates value that helps you pay for it.
And yet others point out that you shouldn’t be financing food delivery. If you can’t afford that delivery now, then you probably can’t afford it spread over 12 months.
But ultimately this comes down to risk vs reward inherent in any financial transaction. The amount of leverage each is person is willing to take depends on their risk appetite. And everyone’s risk appetite is different. The folks frustrated with those who take out a lot of debt can’t fathom why others have greater risk appetite. The folks who do take that debt can’t fathom what’s wrong with doing so when it’s within their appetite.
For a lot of people the "American dream" is going to college and buying a house, even if your family can't support those aspirations. That's not doable for the vast majority of Americans unless they take on some amount of debt. And tbh it's often a good idea from a financial perspective as long as you're thoughtful about when to use leverage
> The amount of leverage each is person is willing to take depends on their risk appetite.
You say "risk appetite" like it's a preference for vanilla over chocolate, but we are in fact talking about people enticed into making objectively bad financial choices that are destructive to their lives.
Yes, people are stupid. People are very old or very young, or don't speak the language well. None of these are excuses to lure people into bad financial decisions.
"I’m sure you’ve read a ton of stories that Gen Z is using “buy now, pay later,” all the time. The most recent Consumer Financial Protection Bureau pointed out that actually the biggest age cohort for “buy now, pay later” users are people ages 34–40. They’re millennials."
On a philosophical tangent, if you BNDP (buy now, don't pay), did you actually buy it? If you did indeed buy it, who did you buy it from - the original vendor or the party you didn't pay? We may need new language for the times we are living in.
Id daresay that what you asked isn't philosophical, but legal. And from what I gather, yes, it is a sale. And if you don't pay, they ding your credit. Hard.
And low/no credit people can't even use these services.
But to the larger point, there's a lot of things that claim to be a sale, but aren't really. I'm especially thinking of DRM music, movies, software, and generally copyrighted goods like that. Those folks are sure addicted to using the language of "sale" and then removing as they choose whatever they wish.
"BNPL providers can offer zero-percent interest rates because they charge merchants three to four times the average credit-card processing fee."
Right. And the vendor can't charge a higher price to the BNPL crowd, so they average it out over everyone. And thus the BNPL app user gets an "interest free" microloan, with everyone, even the people paying cash, having to pony up for the interest.
Just like credit cards with their incentive programs... the card companies are skimming 2-3% off the top anyway, might as well capture some of that for myself.
Even that was not quite right. Just take a look at those leading providers' financial reports, none would be pretty. They were virtually accumulating customers by providing heavy incentives using investors' money so that they could bump up the share price to allow early investors to exit. Making a profit was not even their secondary priorty.
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 would take out a loan for big things like a house.. But for just about everything else? No. Either you can afford it or you can't.
"But I need a car!" Yes, but you don't need a car you can't save up for, you need a car you CAN save up for.
"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!
When I see the option to finance a sandwich, my brain just melts.. No! If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself, you can make a weeks worth of sandwiches for what one ready-made one cost.
I'll be honest with you, it sounds like you've lead a pretty sheltered life. Living in poverty is fucking hard. All around you are parasites looking to take what little you have and kick you back to the floor.
Yeah, of course parents tell their kids to do better in life. But it feels like the world is conspiring against you at every step of the way. The only time anything good happens, it's due to the kindness of someone else, and kindness is not something you see often.
To me, it sounds more like they have lived a European life, not a sheltered life. Outside of the UK, there aren’t any European countries I know of that use e.g. credit cards on a daily basis. We are taught to avoid taking on debt and are financially risk-averse.
How is “buy what you can pay “ mentality a result of a “sheltered life”？ It is probably the opposite. Although I would add BNPL is largely embedded in US culture and education. Geez, we even apply that to our education..
"Everyone is ready to take money from poor people and that's why your racist (or whatever) if you don't let poor people give their money to people ready to take it from them!!!1!"
Also the notion that successful people should not be giving advice to people who are less successful, because then... what, the less successful people might become more like the successful people? -- anyways, that notion is completely backward. One could only endorse it if one really wanted the less successful people to remain down in life.
He is in Denmark, where there is social democracy, high taxes and all encompassing social programs to protect people from the ravages of the Randian market. Of course he lived a sheltered life. But its not a fault on his side. People in countries with Randian realities not being protected from the ravages of the economy is where the fault is at.
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 black and white as either having or not having the money right now. If you have enough regular income to afford something over time and the interest rate is low/0%, it may make sense to spread the payments out over time rather than all at once. For example if you wanted to buy a €5K camera and maybe you don't have the money all at once but can afford to make 12 payments, what's inherently wrong about doing so?
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").
> 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.
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...)
Invariably people who use that service plan to spend 100% of their monthly income. Whenever you have an unexpected expense in that 12 month time frame and have to pay for that, then you can't make the payment on that loan.
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.
Just because you are financing, doesn’t mean you are buying things with money you don’t have, only financially illiterate people of a particularly dim nature would say that.
There are plenty of reasons to delay paying for things as much as possible, especially if the financing has zero cost. Say you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it. A dollar today is not the same as a dollar tomorrow.
Another common reason for that is to stretch your credit limit without affecting your credit score. Say your credit card has a £30k credit limit. There is an expensive 4-5 figure gift you want to buy for your girlfriend for Christmas or take an expensive holiday to some exotic location. You can afford it, but it’s going to cost a few months’ salary and a dip in your credit score. You can pay for your purchase with BNPL without leaving you nothing at the end of the next few months and have no impact on your credit score.
BNPL is a great financial buffer for everyone, as long as you have some baseline discipline to pay off what you owe.
> ay you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it.
Those 0% financing offers only exist because interest rates are extremely low. I don't know about others but you know what else is low these days? The return on my index funds. If I invest those £800 now, I miss out on what, £8 over the course of a year? Compounding that makes very little difference at retirement age but for many of us, the mental overhead to manage these loans and the chance of taking on too much (interest rates will go up again) and making a mistake is just not worth it. Besides, if you BNPL you wouldn't want to park that money somewhere volatile anyway, an index fund, what if interest rates rise and you need that money all of a sudden but your index fund didn't gain anything. All of a sudden you lost money. Maybe I just don't get it, I'm happy to learn if there's a flaw in my thinking here.
The issue is that financing changes what is available in the marketplace for you to buy. There are cheap new cars that don't break down every year (ex. toyota hilux) that are not sold in the US. Because it's more profitable to finance you a 50k truck than a 20k truck.
The housing market works the same. If we didn't standardize fixed rate mortgages houses would be cheaper smaller and more available.
> "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 somewhat-recent used car is like the pair of boots of the story - the poor person that buys a trash barely roadworthy 2000$ car each year pays at least 20000$ over ten years plus whatever the extra cost of maintaining a trash car each year is, higher insurance rates, more fuel and has more trouble with unreliability and the followup costs (i.e. unplanned uber/whatever fees to get to work because the car broke down). Not to mention if they do repairs themselves, they need to have or acquire the skills and tools and have the time available for doing such repairs. Neither of this is cheap.
In contrast, the rich person who either buys a decent new/recent-used car or finances it pays roughly the same amount of money if he sells the car after these ten years, paid less for maintenance, insurance and fuel, had less issues getting to and from work and a higher quality of life.
The real problem is that a full time employed person in most Western countries can no longer afford a new Western-made car without going into serious amounts of debt. Cars have gotten too expensive and wages (especially after tax, rent and basic costs of life) have gotten too low - a complete turnaround from the Ford era whose principle it was that a worker should be able to afford the product he makes in a reasonable time!
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 ownership.
Every 2 years, there is a mandatory inspection of the car.
I buy a car with the following requirements: 1. My strong intuition that it can survive for 2 years with zero maintenance. 2. After 2 years, my TCO will be less than if I rented a new car. 3. It's freshly inspected so I don't need to worry about that for the next 2 years.
Sure, I get to drive old cars, but I bear zero risk, if I crash it, or someone drives into it, or I chose to use it as a ladder while wearing muddy boots (has happned) to reach something up high, I can do it, I can treat it as trash, it does not matter, it's not losing any value because I already wrote it off. A rental car, you can't destroy.. I feel having a car that I can destroy is worth more than driving a new car.
If, after 2 years, it looks like it can pass inspection, I try, and if it's cheap to fix, I fix what needs fixing, and drive another 2 years. This is a super-win situation, because then my yearly COO becomes about half of what it costs to rent.
If it can't pass inspection, I toss it, and buy a new one and I have "broken even" compared to renting.
I get the "don't worry about maintenance" perk of renting combined with "not getting in trouble if it's pretty beaten up when I'm done with it" perk of owning.
Sure, it means that I run a risk of a sudden breakdown, in that case, I'll get it towed (to junk or home to fix) and I'll have to take the bus, work from home or arrange a day off for fixing it, but it's been my experience that it almost never happens that a freshly inspected car fails randomly within the two years until next inspection.
As someone who only ever bought what you would describe as "trash" cars of up to 2000 Euros, let me give you some data.
Looking through my car repair/TCO excel file, I average to about 60 Euros per month in maintenance and repairs (that includes stuff like new tires every once in a while). Over the average lifetime of my cars (which is 5 years), that's 3600 Euros in repairs and maintenance. I regularly sell the cars for 500 Euros, so that's a TCO of ((2000-500)+3600) = 5100 Euros per vehicle, or about 1020 Euros per year.
The initial, 6-month manufacturer-suggested service for a new car alone is upwards of 2000 Euros, for a car that should not have and trouble. Most cars are nowadays impossible to repair yourself, or repair cheaply (new headlight bulb was 3 Euros before, now you have to change the whole 1300 Euro unit). But let's assume I'll have 150 Euros in maintenance per month... that's 9000 Euros. Depreciation over 5 years easily is a third of the vehicle's value, let's say 10000 Euros overall, on top of maintenance and repairs. Together, I get to a TCO per year of 3800 Euros, or a whopping 2780 Euros more!
Now, fuel efficiency. I drive about 25000 km/year. My clunkers consume - on average - 7.5 liters per 100 km - that's about 31.4 MPG. For something comparable, the manufacturer (if we want to believe them) currently lists about 5.8 liters per 100 km, or 40.6 MPG. This means that I could save 475 liters of fuel with a new car. A liter right now costs about 1.80 Euros, meaning I am leaving savings of 855 Euros on the table.
So ... I pay 2780 Euros more to save 855 Euros - BEFORE the extra cost of a loan to buy a new car ... NOT a good deal.
The boots theory does not really hold for mass produced items, including boots. A usable pair of cheaply made boots costs less than resoling a good pair of boots. I propose the Buzz Bissinger boots theory: Buzz is not rich because he buys fancy boots, Buzz buys fancy boots because he inherited a lot of money.
https://www.gq.com/story/buzz-bissinger-shopaholic-gucci-add...
The sweet spot in TCO for cars is generally (look at Edmunds numbers) a new compact in base trim. TCO will go up with a more expensive or "higher quality" car. If you are in the position between choosing to finance a new compact at low/reasonable interest rates or pay outright for a beater, the new car will be the better deal. A used compact is actually an OK compromise if you don't have money up front or want lower payments - a 5-year-old Corolla has slightly higher TCO than a new one, but not by that much.
Being able to pay on time for a compact car requires some basic financial stability but that's not "rich".
> "But I need a car!" Yes, but you don't need a car you can't save up for, you need a car you CAN save up for.
How are you going to save up for a car if you can't drive to work? You certainly can't afford to move to one of the three places in the US with functioning public transport systems.
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.
In the last decade credit rampage has spread in Europe too, I still remember not long ago where the idea of buying things in installments seemed crazy to the average Italian. The only thing that gets a pass is a mortgage.
But buying a phone or computer in installments? How does that make sense?
You can't afford it, end of story.
I'm also not used to pay interests on my credit card, if I spend 1000 euros, at the end of the month takes away 1000 from my account and that's the end of story. Why would I pay interests on my daily finances, sounds crazy and a recipe for always having to worry about money.
> But buying a phone or computer in installments? How does that make sense?
> You can't afford it, end of story.
I'm not saying you are privileged, but I generally only hear this argument from people who have never been poor, or people in countries with functional social safety nets.
Having no computer, phone, car, or washing machine (or an extremely old one) can cost more money and time in the long run due to Capt. Samuel Vimes' boots theory of socioeconomic unfairness (https://moneywise.com/managing-money/budgeting/boots-theory-...).
For example, a lot of government paperwork is now online, if you have to do it at the local library now you have to spend the time to get there. Simple things like managing your passwords or personal documents is harder if you have to run your life from a thumb drive plugged into a public computer. If you have to use a commercial laundromat you will end up spending more money (not to mention time!) cleaning your clothes. If you have no car and can't afford to live in a walkable neighborhood you'll spend a good chunk of your life waiting for the bus. A car helps but a very old car eventually becomes a temperamental money sink that may also result in you being late for work which jeopardizes your income. Being poor is expensive and time-consuming in ways that people who have not been poor typically do not understand.
Of course many people go into debt to buy luxuries they do not need, and that is bad. But going into debt for items that save you time or money in the long run can be a financially sound decision.
> If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself
If you're talking about the US, if you're poor the nearest grocery store will be miles away, dirty, and the prices will be a 50% markup over what people pay in nice neighborhoods. Also, McDonald's will sell you an entire meal for $3 and is down the street.
I was going to say the same. I suspect that anyone who believes that fast-food is more expensive than a grocery store has never lived in a poor neighborhood.
It's sometimes an emergency loan to get your car fixed or to get a replacement car, so that you don't get fired from the job you drive to, so that you have enough money to continue paying for a roof and food.
I personally hate debt and when possible I pay everything with cash up front.
My wife got pregnant, and our spending, specially on health was already sky high, so I did 5 months of overtime chasing a promised raise and possible promotion.
Then I got fired.
My last day of work was mid December. Child will be born soon. (Maybe even today, we are hoping for natural birth).
The medical crew we hired (back when I had a job and was chasing that promotion) want way more money than what I have left.
I will have to take a loan, because as far as I know I can't tell the baby to wait until I have a new job before coming out of the womb...
Need clothes, medicine, furniture, prepare the house (it is my first child, house is not kid friendly)
Also: I erased most of my savings buying a "cool" car and of course a lot of people criticized me for it.
What happened was:
1. My house is on the top of a huge hill in an rural area, only way to reach the house in practice is with a powerful car. The car I had before was barely powerful enough, if there was more people in the car it would fail to climb the hill.
2. Someone totalled the car I had, and my wife job was literally in another city, her workplace also in middle of nowhere.
3. I needed a new car urgently, options were: cheapest European or US cars were double the money I had saved. Asian cars (like Hyundai and Chinese ones) were 1.5 the money I had, but weaker that the totalled car, they certainly wouldn't climb the hill.
4. So I bought a used Mitsubishi Lancer. It is a cool flashy car? Yes it is. But it was 100% my savings (instead of 200%), powerful enough to climb the hill, and big enough to fit baby chair and all the stuff a baby needs. The corolla or the civic, used, were 200% my savings, new were 300% my savings.
So you can barely afford your own needs and have no savings, but you decide to have a child?.. No offense, I'm just curious about your thinking and priorities.
See the SNL skit: Don't Buy Stuff https://www.youtube.com/watch?v=R3ZJKN_5M44 which advertises a self help financial book whose contents are "If you don't have the money, don't buy it"
Not having money, i.e. poverty, and how you have to balance needs/wants/now/future is bit more complicated than this. In the same way you can't tell an alcoholic to 'just stop drinking' or someone in an abusive relationship to 'just leave them'. Because there is more going on than a simple econ 101 decision process happening.
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 order of sandwiches at a house party (as mentioned elsewhere in this thread).
Side question: how are these services able to offer lower APRs than credit cards without collateral? Do they evaluate your creditworthiness on the basis of paying equal installments as opposed to revolving credit with a minimum payment? If so then how are they different from an old-fashioned personal loan from a bank?
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!)
Nope, it doesn't make sense as you mentioned. But imagine that you were an investment bank with almost infinite cheap money has nowhere to go, you will probably put it into whatever dumb idea out there as long as there is a clear exit strategy. It's virtually exploiting those financially vulnerable ones by providing heavy incentive to lure them into using BNPL and bump up the share price so they can exit with profit. Even if it did not work out, it just a failed investment that can be written off.
But for those desperate users, as long as they can get what they want now, they don't really care whether if they can repay at all.
The fast fashion debate is similar to this. People who are against it say that it's environmental unsustainable and expensive to buy new clothes more frequently. People who like fast fashion respond that it's only rich people who have the luxury to buy durable, high quality clothing that lasts more than a season.
The pro fast fashion argument is that they have no choice. The reality is likely that they just like buying new clothes from these stores more frequently and can easily come up with a justification.
Time preference. People can't think in enough detail about the future or prefer pain later over pain now.
What's worse, the entire economy modifies itself to suit the needs of the borrowers. The price of goods increases for people who are paying cash because they are now competing with those who will borrow. Then policy is tailored to their needs via inflationary currency.
There is a reason ancient societies banned lending or had regular debt jubilees.
You sound like me, a friend who's not fun at objects party. All my friends told me I hold my debit card wrong, should get a nice promo credit card and spend like there's no tomorrow. All discipline they told me just eliminate 97% of the point of credit. "Someone else money" is the only appealing because the someone will take care of a lot of hustle for us.
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.
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...
“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, including protections against fraud, extra warranty, free lounge access at airports, and other perks.
I'd lose money if I used BNPL unless I can automatically buy government bonds that can pay more than 2-4% within the pay back period.
I wonder how much Gen Z is losing by using BNPL.
In all my years of using credit cards, I've never paid interest. I've always paid the full amount every month. Does Gen Z lack this discipline?
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 because my bank doesn't make a debit card with a spending limit over $2000, which isn't enough to cover all foreseeable emergencies. I hate it. I hate that I'm incentivised to carry it around, I hate the temptation it represents, I hate that normal debit cards don't get the "rewards" and "benefits" that function as bait on a hook.
Gen Z is an entire generation, and not one I belong to. However, I assume it's like every other generation in that it has people who are desperate, greedy, mentally incapable, or otherwise perfect victims for the bank to sink its teeth into.
> 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.
It is kind of grim when I stop to think about how the probably several thousand dollars in cash-back bonuses I've received over the years of never paying a single cent of interest on my credit cards is probably subsidized by the people who do fall into this.
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.
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 you are forgetting that Gen Z are literally kids. If they have a job at all, it'll be a parttime one with a very flexible contract. Without stable income, a credit card can easily become an unacceptable risk.
Ah, so now we've finally moved on from "Millennials are children" to "Gen Z are children". While it may still be true of some of them (I'm not sure exactly what the accepted bounds of "Gen Z" are these days), many are full-grown adults in their 20s with full-time jobs.
And many of those full-grown adults in their 20s with full-time jobs still can't afford to even rent a place without multiple roommates to share the cost with.
In general all those perks are paid for by rather significant credit card processing fees, which you pay for yourself via increased product prices.
The price is the same whether you pay via BNPL or credit card.
I get that merchants get charged by credit card companies. I also know that I'm not going to make a difference by boycotting credit card companies. I'd just lose out.
Also, BNPL companies charge merchants the same way credit card companies do.
I think you are forgetting that Gen Z are not literally kids, they are just forced to live as such by the fact that being an adult with its own house and family has become prohibitively expensive.
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.
Wow. I know HN hates Amazon, but as an example, the Amazon Prime cards give 5% back on everything bought on Amazon and at WholeFoods. That's not insignificant.
Also, if you did happen to miss payment because you forgot, 1 mos. of interest really isn't very much and certainly isn't the end of the world. The problem with CCs is when people don't pay them off and continue to put more and more charges on them. That's when things really add up.
Finally, that extra layer of separation between my money and the merchant/card thief is a good thing. CC gets stolen and I never lose possession of my money. Debit card gets stolen, and no matter how fast they reverse the charges, there's still a point where I lost possession.
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.
Same. But I also never had problem with payment (I cancelled[or returned] purchase less than 4 times in my life, I can only thinking 1 or 2). Almost all credit card benefits are even out the production of incentives it drives. It's hard to prove if you spend 5% more with 3% cash back or not.
> 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.
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).
Readit News
Some folks say consumers should never take on debt for purchases, when they can save up instead. Others point out that it’s unavoidable in some cases. You may need a car to get to your job, meaning the asset you purchased creates value that helps you pay for it.
And yet others point out that you shouldn’t be financing food delivery. If you can’t afford that delivery now, then you probably can’t afford it spread over 12 months.
But ultimately this comes down to risk vs reward inherent in any financial transaction. The amount of leverage each is person is willing to take depends on their risk appetite. And everyone’s risk appetite is different. The folks frustrated with those who take out a lot of debt can’t fathom why others have greater risk appetite. The folks who do take that debt can’t fathom what’s wrong with doing so when it’s within their appetite.
That’s it, that’s the thread.
I don't think Americans understand that their credit card rewards/etc simply don't exist in Europe.
There is literally no reason for me to ever use a credit card, it just costs me money.
You say "risk appetite" like it's a preference for vanilla over chocolate, but we are in fact talking about people enticed into making objectively bad financial choices that are destructive to their lives.
Yes, people are stupid. People are very old or very young, or don't speak the language well. None of these are excuses to lure people into bad financial decisions.
Deleted Comment
Hidden costs of BNPLs: https://slate.com/technology/2022/11/buy-now-pay-later-hidde...
"I’m sure you’ve read a ton of stories that Gen Z is using “buy now, pay later,” all the time. The most recent Consumer Financial Protection Bureau pointed out that actually the biggest age cohort for “buy now, pay later” users are people ages 34–40. They’re millennials."
People with low/no credit are usually denied.
NYTimes article about downsides of BNPLs: https://www.nytimes.com/2022/12/29/your-money/buy-now-pay-la...
And low/no credit people can't even use these services.
But to the larger point, there's a lot of things that claim to be a sale, but aren't really. I'm especially thinking of DRM music, movies, software, and generally copyrighted goods like that. Those folks are sure addicted to using the language of "sale" and then removing as they choose whatever they wish.
Right. And the vendor can't charge a higher price to the BNPL crowd, so they average it out over everyone. And thus the BNPL app user gets an "interest free" microloan, with everyone, even the people paying cash, having to pony up for the interest.
Just like credit cards with their incentive programs... the card companies are skimming 2-3% off the top anyway, might as well capture some of that for myself.
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 would take out a loan for big things like a house.. But for just about everything else? No. Either you can afford it or you can't.
"But I need a car!" Yes, but you don't need a car you can't save up for, you need a car you CAN save up for.
"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!
When I see the option to finance a sandwich, my brain just melts.. No! If you don't have money for fast-food, then go to the grocery store and buy the ingredients yourself, you can make a weeks worth of sandwiches for what one ready-made one cost.
Yeah, of course parents tell their kids to do better in life. But it feels like the world is conspiring against you at every step of the way. The only time anything good happens, it's due to the kindness of someone else, and kindness is not something you see often.
"Everyone is ready to take money from poor people and that's why your racist (or whatever) if you don't let poor people give their money to people ready to take it from them!!!1!"
Also the notion that successful people should not be giving advice to people who are less successful, because then... what, the less successful people might become more like the successful people? -- anyways, that notion is completely backward. One could only endorse it if one really wanted the less successful people to remain down in life.
Deleted Comment
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 black and white as either having or not having the money right now. If you have enough regular income to afford something over time and the interest rate is low/0%, it may make sense to spread the payments out over time rather than all at once. For example if you wanted to buy a €5K camera and maybe you don't have the money all at once but can afford to make 12 payments, what's inherently wrong about doing so?
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/press/deliveroo-and-kla...
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...)
I put a (vegan) sausage roll from Gregg's on Monzo Flex the other day...
Its absurdly common.
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
There are plenty of reasons to delay paying for things as much as possible, especially if the financing has zero cost. Say you bought a new £800 stand mixer on Black Friday. Splitting the costs in 3 allows you to deploy the funds elsewhere, such as investing in an index fund, buying bonds or put into a CD account or anything productive to offset some of the cost or if you are lucky, cover it. A dollar today is not the same as a dollar tomorrow.
Another common reason for that is to stretch your credit limit without affecting your credit score. Say your credit card has a £30k credit limit. There is an expensive 4-5 figure gift you want to buy for your girlfriend for Christmas or take an expensive holiday to some exotic location. You can afford it, but it’s going to cost a few months’ salary and a dip in your credit score. You can pay for your purchase with BNPL without leaving you nothing at the end of the next few months and have no impact on your credit score.
BNPL is a great financial buffer for everyone, as long as you have some baseline discipline to pay off what you owe.
Those 0% financing offers only exist because interest rates are extremely low. I don't know about others but you know what else is low these days? The return on my index funds. If I invest those £800 now, I miss out on what, £8 over the course of a year? Compounding that makes very little difference at retirement age but for many of us, the mental overhead to manage these loans and the chance of taking on too much (interest rates will go up again) and making a mistake is just not worth it. Besides, if you BNPL you wouldn't want to park that money somewhere volatile anyway, an index fund, what if interest rates rise and you need that money all of a sudden but your index fund didn't gain anything. All of a sudden you lost money. Maybe I just don't get it, I'm happy to learn if there's a flaw in my thinking here.
However some big things make sense to finance.
Take your car example: I'm not rich enough to buy a car that won't break down every year (I know, I tried).
However, when my car breaks down, I can't go to my clients and I lose money.
In this case, it makes sense to rent out a car that's going to be working properly, and with guarantees in case it doesn't.
However yes, I wouldn't buy a toaster in multiple payments...
The housing market works the same. If we didn't standardize fixed rate mortgages houses would be cheaper smaller and more available.
Deleted Comment
You're ignoring the "boots theory" [1]. A new or somewhat-recent used car is like the pair of boots of the story - the poor person that buys a trash barely roadworthy 2000$ car each year pays at least 20000$ over ten years plus whatever the extra cost of maintaining a trash car each year is, higher insurance rates, more fuel and has more trouble with unreliability and the followup costs (i.e. unplanned uber/whatever fees to get to work because the car broke down). Not to mention if they do repairs themselves, they need to have or acquire the skills and tools and have the time available for doing such repairs. Neither of this is cheap.
In contrast, the rich person who either buys a decent new/recent-used car or finances it pays roughly the same amount of money if he sells the car after these ten years, paid less for maintenance, insurance and fuel, had less issues getting to and from work and a higher quality of life.
The real problem is that a full time employed person in most Western countries can no longer afford a new Western-made car without going into serious amounts of debt. Cars have gotten too expensive and wages (especially after tax, rent and basic costs of life) have gotten too low - a complete turnaround from the Ford era whose principle it was that a worker should be able to afford the product he makes in a reasonable time!
[1] https://en.wikipedia.org/wiki/Boots_theory
Now, cars are insanely taxes in Denmark, near 300%, and they lose about half their value the first year of ownership.
Every 2 years, there is a mandatory inspection of the car.
I buy a car with the following requirements: 1. My strong intuition that it can survive for 2 years with zero maintenance. 2. After 2 years, my TCO will be less than if I rented a new car. 3. It's freshly inspected so I don't need to worry about that for the next 2 years.
Sure, I get to drive old cars, but I bear zero risk, if I crash it, or someone drives into it, or I chose to use it as a ladder while wearing muddy boots (has happned) to reach something up high, I can do it, I can treat it as trash, it does not matter, it's not losing any value because I already wrote it off. A rental car, you can't destroy.. I feel having a car that I can destroy is worth more than driving a new car.
If, after 2 years, it looks like it can pass inspection, I try, and if it's cheap to fix, I fix what needs fixing, and drive another 2 years. This is a super-win situation, because then my yearly COO becomes about half of what it costs to rent. If it can't pass inspection, I toss it, and buy a new one and I have "broken even" compared to renting.
I get the "don't worry about maintenance" perk of renting combined with "not getting in trouble if it's pretty beaten up when I'm done with it" perk of owning.
Sure, it means that I run a risk of a sudden breakdown, in that case, I'll get it towed (to junk or home to fix) and I'll have to take the bus, work from home or arrange a day off for fixing it, but it's been my experience that it almost never happens that a freshly inspected car fails randomly within the two years until next inspection.
Looking through my car repair/TCO excel file, I average to about 60 Euros per month in maintenance and repairs (that includes stuff like new tires every once in a while). Over the average lifetime of my cars (which is 5 years), that's 3600 Euros in repairs and maintenance. I regularly sell the cars for 500 Euros, so that's a TCO of ((2000-500)+3600) = 5100 Euros per vehicle, or about 1020 Euros per year.
The initial, 6-month manufacturer-suggested service for a new car alone is upwards of 2000 Euros, for a car that should not have and trouble. Most cars are nowadays impossible to repair yourself, or repair cheaply (new headlight bulb was 3 Euros before, now you have to change the whole 1300 Euro unit). But let's assume I'll have 150 Euros in maintenance per month... that's 9000 Euros. Depreciation over 5 years easily is a third of the vehicle's value, let's say 10000 Euros overall, on top of maintenance and repairs. Together, I get to a TCO per year of 3800 Euros, or a whopping 2780 Euros more!
Now, fuel efficiency. I drive about 25000 km/year. My clunkers consume - on average - 7.5 liters per 100 km - that's about 31.4 MPG. For something comparable, the manufacturer (if we want to believe them) currently lists about 5.8 liters per 100 km, or 40.6 MPG. This means that I could save 475 liters of fuel with a new car. A liter right now costs about 1.80 Euros, meaning I am leaving savings of 855 Euros on the table.
So ... I pay 2780 Euros more to save 855 Euros - BEFORE the extra cost of a loan to buy a new car ... NOT a good deal.
The sweet spot in TCO for cars is generally (look at Edmunds numbers) a new compact in base trim. TCO will go up with a more expensive or "higher quality" car. If you are in the position between choosing to finance a new compact at low/reasonable interest rates or pay outright for a beater, the new car will be the better deal. A used compact is actually an OK compromise if you don't have money up front or want lower payments - a 5-year-old Corolla has slightly higher TCO than a new one, but not by that much.
Being able to pay on time for a compact car requires some basic financial stability but that's not "rich".
How are you going to save up for a car if you can't drive to work? You certainly can't afford to move to one of the three places in the US with functioning public transport systems.
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.
But buying a phone or computer in installments? How does that make sense?
You can't afford it, end of story.
I'm also not used to pay interests on my credit card, if I spend 1000 euros, at the end of the month takes away 1000 from my account and that's the end of story. Why would I pay interests on my daily finances, sounds crazy and a recipe for always having to worry about money.
I'm not saying you are privileged, but I generally only hear this argument from people who have never been poor, or people in countries with functional social safety nets.
Having no computer, phone, car, or washing machine (or an extremely old one) can cost more money and time in the long run due to Capt. Samuel Vimes' boots theory of socioeconomic unfairness (https://moneywise.com/managing-money/budgeting/boots-theory-...).
For example, a lot of government paperwork is now online, if you have to do it at the local library now you have to spend the time to get there. Simple things like managing your passwords or personal documents is harder if you have to run your life from a thumb drive plugged into a public computer. If you have to use a commercial laundromat you will end up spending more money (not to mention time!) cleaning your clothes. If you have no car and can't afford to live in a walkable neighborhood you'll spend a good chunk of your life waiting for the bus. A car helps but a very old car eventually becomes a temperamental money sink that may also result in you being late for work which jeopardizes your income. Being poor is expensive and time-consuming in ways that people who have not been poor typically do not understand.
Of course many people go into debt to buy luxuries they do not need, and that is bad. But going into debt for items that save you time or money in the long run can be a financially sound decision.
If you're talking about the US, if you're poor the nearest grocery store will be miles away, dirty, and the prices will be a 50% markup over what people pay in nice neighborhoods. Also, McDonald's will sell you an entire meal for $3 and is down the street.
I personally hate debt and when possible I pay everything with cash up front.
My wife got pregnant, and our spending, specially on health was already sky high, so I did 5 months of overtime chasing a promised raise and possible promotion.
Then I got fired.
My last day of work was mid December. Child will be born soon. (Maybe even today, we are hoping for natural birth).
The medical crew we hired (back when I had a job and was chasing that promotion) want way more money than what I have left.
I will have to take a loan, because as far as I know I can't tell the baby to wait until I have a new job before coming out of the womb...
Need clothes, medicine, furniture, prepare the house (it is my first child, house is not kid friendly)
Also: I erased most of my savings buying a "cool" car and of course a lot of people criticized me for it.
What happened was:
1. My house is on the top of a huge hill in an rural area, only way to reach the house in practice is with a powerful car. The car I had before was barely powerful enough, if there was more people in the car it would fail to climb the hill.
2. Someone totalled the car I had, and my wife job was literally in another city, her workplace also in middle of nowhere.
3. I needed a new car urgently, options were: cheapest European or US cars were double the money I had saved. Asian cars (like Hyundai and Chinese ones) were 1.5 the money I had, but weaker that the totalled car, they certainly wouldn't climb the hill.
4. So I bought a used Mitsubishi Lancer. It is a cool flashy car? Yes it is. But it was 100% my savings (instead of 200%), powerful enough to climb the hill, and big enough to fit baby chair and all the stuff a baby needs. The corolla or the civic, used, were 200% my savings, new were 300% my savings.
Side question: how are these services able to offer lower APRs than credit cards without collateral? Do they evaluate your creditworthiness on the basis of paying equal installments as opposed to revolving credit with a minimum payment? If so then how are they different from an old-fashioned personal loan from a bank?
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!)
But for those desperate users, as long as they can get what they want now, they don't really care whether if they can repay at all.
The pro fast fashion argument is that they have no choice. The reality is likely that they just like buying new clothes from these stores more frequently and can easily come up with a justification.
What's worse, the entire economy modifies itself to suit the needs of the borrowers. The price of goods increases for people who are paying cash because they are now competing with those who will borrow. Then policy is tailored to their needs via inflationary currency.
There is a reason ancient societies banned lending or had regular debt jubilees.
Deleted Comment
Dead Comment
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.
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...
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, including protections against fraud, extra warranty, free lounge access at airports, and other perks.
I'd lose money if I used BNPL unless I can automatically buy government bonds that can pay more than 2-4% within the pay back period.
I wonder how much Gen Z is losing by using BNPL.
In all my years of using credit cards, I've never paid interest. I've always paid the full amount every month. Does Gen Z lack this discipline?
I have one because my bank doesn't make a debit card with a spending limit over $2000, which isn't enough to cover all foreseeable emergencies. I hate it. I hate that I'm incentivised to carry it around, I hate the temptation it represents, I hate that normal debit cards don't get the "rewards" and "benefits" that function as bait on a hook.
Gen Z is an entire generation, and not one I belong to. However, I assume it's like every other generation in that it has people who are desperate, greedy, mentally incapable, or otherwise perfect victims for the bank to sink its teeth into.
It is kind of grim when I stop to think about how the probably several thousand dollars in cash-back bonuses I've received over the years of never paying a single cent of interest on my credit cards is probably subsidized by the people who do fall into this.
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.
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 you are forgetting that Gen Z are literally kids. If they have a job at all, it'll be a parttime one with a very flexible contract. Without stable income, a credit card can easily become an unacceptable risk.
And many of those full-grown adults in their 20s with full-time jobs still can't afford to even rent a place without multiple roommates to share the cost with.
The price is the same whether you pay via BNPL or credit card.
I get that merchants get charged by credit card companies. I also know that I'm not going to make a difference by boycotting credit card companies. I'd just lose out.
Also, BNPL companies charge merchants the same way credit card companies do.
You might want to check out your math on that one.
Deleted Comment
Also, if you did happen to miss payment because you forgot, 1 mos. of interest really isn't very much and certainly isn't the end of the world. The problem with CCs is when people don't pay them off and continue to put more and more charges on them. That's when things really add up.
Finally, that extra layer of separation between my money and the merchant/card thief is a good thing. CC gets stolen and I never lose possession of my money. Debit card gets stolen, and no matter how fast they reverse the charges, there's still a point where I lost possession.
With a debit card you might just lose the money.
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.
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.
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).