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“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.

“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?

crote 4y ago
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.
- senttoschool 4y ago
  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.
  - goosedragons 4y ago
    Yeah. Stores increase prices to account for the higher transaction fees required to support giving CC users 2-4% cashback. Frankly CC reward schemes should be banned. It's just another shitty way for the poor to subsidize the middle class.
    - Existenceblinks 4y ago
      And punish normie who don't over spend because they have the same discipline without in-system credit.
- kortilla 4y ago
  > Also, I think you are forgetting that Gen Z are literally kids. You might want to check out your math on that one.
- deleted 4y ago
  [deleted]
- birracerveza 4y ago
  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.
- cfel 4y ago
  Gen Z starts in 1997.
- danaris 4y ago
  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.
Nextgrid 4y ago
> 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.
- andrewaylett 4y ago
  Banks primarily make money on interchange fees, rather than interest -- if everyone paid on time all the time then they'd be very happy.
  - Dalewyn 4y ago
    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.
  - rcxdude 4y ago
    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-make-money https://www.valuepenguin.com/how-do-credit-card-companies-ma...
    - e63f67dd-065b 4y ago
      It really depends on the card issuer, as different card issuers have different credit profiles. American express, for example, infamously have charge cards that you must pay in full every month, and generally have a prime to super-prime profile, so they make much more money in interchange than in interest. Other banks with more sub-prime profiles (Capital One, BoA?, etc) make much more in interest than interchange.
dbbk 4y ago
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.
- geraldwhen 4y ago
  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.
  - t0mas88 4y ago
    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?
    - matwood 4y ago
      > Is there objective data that US debit cards have more fraud impact for their users? Depends how tightly someones runs their bank account. A fraudulent charge could come at a bad time and trigger your mortgage payment to fail because of insufficient funds. Though, most bank accounts offer overdraft protection, which is really just an available loan that is automatically taken. For me, very few charges come directly out of my bank account. Everything else goes through a CC so I can review prior to paying each month.
    - turdprincess 4y ago
      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.
strken 4y ago
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.
- Dalewyn 4y ago
  >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.
  - strken 4y ago
    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.
    - vageli 4y ago
      Credit card companies make money regardless of whether or not customers carry a balance due to interchange fees.
Dalewyn 4y ago
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).
Existenceblinks 4y ago
You may pay more than the interest. It's hard to prove the diff of purchase rates between if you have vs haven't had the incentives.
mym1990 4y ago
Not only does Gen Z lack this discipline, most people with credit cards lack this discipline.

crote 4y ago

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.

senttoschool 4y ago
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.
- goosedragons 4y ago
  Yeah. Stores increase prices to account for the higher transaction fees required to support giving CC users 2-4% cashback. Frankly CC reward schemes should be banned. It's just another shitty way for the poor to subsidize the middle class.
  - Existenceblinks 4y ago
    And punish normie who don't over spend because they have the same discipline without in-system credit.
kortilla 4y ago
> Also, I think you are forgetting that Gen Z are literally kids. You might want to check out your math on that one.
deleted 4y ago
[deleted]
birracerveza 4y ago
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.
cfel 4y ago
Gen Z starts in 1997.
danaris 4y ago
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.

Nextgrid 4y ago

> 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.

andrewaylett 4y ago
Banks primarily make money on interchange fees, rather than interest -- if everyone paid on time all the time then they'd be very happy.
- Dalewyn 4y ago
  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.
- rcxdude 4y ago
  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-make-money https://www.valuepenguin.com/how-do-credit-card-companies-ma...
  - e63f67dd-065b 4y ago
    It really depends on the card issuer, as different card issuers have different credit profiles. American express, for example, infamously have charge cards that you must pay in full every month, and generally have a prime to super-prime profile, so they make much more money in interchange than in interest. Other banks with more sub-prime profiles (Capital One, BoA?, etc) make much more in interest than interchange.

dbbk 4y ago

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.

geraldwhen 4y ago
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.
- t0mas88 4y ago
  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?
  - matwood 4y ago
    > Is there objective data that US debit cards have more fraud impact for their users? Depends how tightly someones runs their bank account. A fraudulent charge could come at a bad time and trigger your mortgage payment to fail because of insufficient funds. Though, most bank accounts offer overdraft protection, which is really just an available loan that is automatically taken. For me, very few charges come directly out of my bank account. Everything else goes through a CC so I can review prior to paying each month.
  - turdprincess 4y ago
    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.

strken 4y ago

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.

Dalewyn 4y ago
>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.
- strken 4y ago
  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.
  - vageli 4y ago
    Credit card companies make money regardless of whether or not customers carry a balance due to interchange fees.

Dalewyn 4y ago

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).

Existenceblinks 4y ago

You may pay more than the interest. It's hard to prove the diff of purchase rates between if you have vs haven't had the incentives.

mym1990 4y ago

Not only does Gen Z lack this discipline, most people with credit cards lack this discipline.