10 ms·
More Americans are using ‘buy now, pay later’ services to pay for groceries
- imwithstoopid 4y agoI don't want people borrowing money to buy corn flakes I am willing to pitch in to help that said, why would I not be surprised to find out many of these people have a newer and more expensive phone than me? a nicer car? sorry for the cynicism but I've watched too many people in the drive-up food bank line in $80k pickups...we have a disconnect here
- lettergram 4y agoLol what are credit cards? Most Americans buy now and pay later for everything. I don’t think it’s good, but that’s the truth.
- BizarreByte 4y agoIt's good if you do it responsibly. If you put everything on a good rewards CC and pay it off soon after you will come out ahead.
- lotsofpulp 4y agoThe bar for “responsibly” is as low as it can get. It is just spending a few minutes to set up autopay on the credit card website, and acting like your credit card is a debit card.
- NotYourLawyer 4y agoAnd having enough money that this never backfires.
- notch898a 4y agoThere are several (most?) credit cards you can settle it nightly if you like.
- lotsofpulp 4y agoThis is covered by > acting like your credit card is a debit card.
- Invictus0 4y agoWhy pay for anything in cash if credit cards are giving 3% back + perks?
- tekla 4y agoI get a 2-3% discount on everything with credit cards. There is literally no downside to using credit cards
- docdeek 4y agoI suspect the downside to using credit cards comes when you don’t pay (or can’t pay) the bill during the interest free period or at the end of each month.
- tekla 4y agoHow is that different from not having the cash to buy something in the first place?
- docdeek 4y agoIt’s a downside to credit cards, as opposed to “no downsides” to credit cards.
- pb7 4y agoIt's not a downside. The credit card didn't make you spend money you didn't have, you did.
- jcranmer 4y agoIf you are physically giving up cash, it is much easier to figure out if you have insufficient cash to make a purchase. With a credit card, it is less obvious to figure out that the balance on the card now exceeds the cash you have to pay it off. It can be done, true, but it requires a level of diligence that most people don't have.
- Jochim 4y agoEven people who do have that diligence can be caught out. You do the calculation, make the purchase and a week later encounter an unexpected expense like your car breaking down, or you lose your job. You may now find yourself unable to make the full repayment despite having thought about the purchase before making it.
- waboremo 4y agoIt's not just Americans, the BNPL industry has seem tremendous growth around the world. China reports credit card usage quadrupling and alongside that BNPL schemes, Europe is expected to see the BNPL industry hit close to $1 trillion by 2028. It's a global phenomenon unfortunately.
- r00fus 4y agoThis is terrifying. Googling this definitely raised my stomach acid levels. Who holds all the debt?
- StopHammoTime 4y agoEvery single debt is underwritten individually by a originating bank. Within a few days the BNPL provider is expected to buy that debt back once the remittances to vendors have been made. The BNPL company then takes on the debt. BNPL makes their money by charging a network fee. AFAIK AfterPay charges about 7% and this is meant to cover the debt charges from the banks and administration fees.
- chatmasta 4y agoI recently learned that Klarna is a Swedish company, and was founded in 2005 [0], which surprised me because I don't remember seeing it anywhere until the past ~5 years, when it started appearing as an option on nearly every checkout page. [0] https://en.wikipedia.org/wiki/Klarna https://en.wikipedia.org/wiki/Klarna
- adamnemecek 4y agoI highly doubt that.
- gabereiser 4y agoa lot of times those $80k pickup trucks are used by contractors that can write off the expense but still don't make enough to feed their kids and cover the mortgage. I know a few folks that do this. Their truck is a complete write off because they're contractors for construction or trade-labor. Sometimes its even company provided for the larger builders.
- arcticbull 4y agoThe vast majority of the time those $80K pickup trucks are just people's daily drivers. > 75 percent of truck owners use their truck for towing one time a year or less (meaning, never). > Nearly 70 percent of truck owners go off-road one time a year or less. > And a full 35 percent of truck owners use their truck for hauling—putting something in the bed, its ostensible raison d’être—once a year or less. The F-150 is America's most popular passenger vehicle, and I'm pretty sure construction worker isn't America's most popular job :) [1] https://www.thedrive.com/news/26907/you-dont-need-a-full-size-pickup-truck-you-need-a-cowboy-costume https://www.thedrive.com/news/26907/you-dont-need-a-full-siz...
- gabereiser 4y agoI don't dispute those stats, but it's not just construction workers. Every trademan I've used in the last 20 years has shown up in an F-150 or bigger. Normally to transport their tools in the box or bed. Most folks I know that have a truck of this size, that's the reason. You can't fit a pressure washer in a civic. I do recognize that a lot of folks buy it because the false sense of safety or for "rolling coal and sticking it to hippies".
- arcticbull 4y agoApologies if I was unclear, I 100% expect that every tradesperson has an F-150+ and that they are a business expense! I was intending that to be additive.
- gabereiser 4y ago
- ye-olde-sysrq 4y agoIt's worth noting that since we've been in a near-zero interest rate environment for a long time, servicing $80k of debt was comparatively very easy, especially when car makers dealers were desperate to keep selling more and more cars even if the loans were going to be hot garbage. So it's very possible that these people managed to drive off the lot with that car without putting barely anything out-of-pocket.
- deleted 4y ago[deleted]
- giraffe_lady 4y ago"A judge is one thing an almsgiver is another." If you want to help help, if you don't don't. What you're doing here is the worst of both basically.
- thwayunion 4y agoI can't remember the last time I paid for groceries with anything other than a credit card. Or even saw someone else pay for groceries with plastic, which is hopefully CC or EBT since using debit cards at POS is kind of risky.
- yeahsure22 4y ago[dead]
- Jochim 4y agoSome of them might. Those commitments may have been affordable at the time. There's not much you can if your situation changes once you owe the money.
- PuppyTailWags 4y agoIf I just got a new phone and then lost my job what's wrong with me going to the food bank? If I just got a nice car and then had to get helicopter'd (out of network so I have to eat the full cost) for a medical emergency, what's wrong with me going to the food bank? I don't want to be in line. I don't want to be publicly seen unable to afford food.
- notch898a 4y agoNothing, please just don't be the guy I saw with a brand new car literally clearing out the unattended "little food bank" stand to sell stuff on facebook marketplace (while audibly complaining about the low value of the DVDs also placed in there). Sadly when I see the new car kind of people that seems to be what they're doing.
- xboxnolifes 4y agoBecause of loans and human Psych. I'm becoming more and more convinced that easy access to loans (Buy now, pay later) is too dangerous for the social part of society, assuming we also want to protect those who abuse them from their own actions. They seem to only marginally help those who already have money, but frequently negatively impact those who either don't have money or just make very bad financial decisions.
- jongjong 4y agoWith the current inflation figures, it might actually be a smart move. If the interest charged on the loan is less than inflation, then it makes sense for the consumer to borrow. The company makes a nominal profit on the loan but a net loss in terms of buying power; similar mistake made by SVB; tomorrow-money is not worth the same as today-money. Since 2008, the Fed has been paying interest on deposits using newly issued currency. That free money will keep entering the economy and cause inflation. The higher they raise the rates, the more free money will enter the economy.
- ollien 4y agoFrom the article > “While a pay-in-four plan doesn’t usually charge interest, longer-term BNPL plans may charge an annual percentage rate up to 30%,” an article in Nerdwallet noted in 2022. “Fees, like for late or rescheduled payments, range from $1 to $10 and are sometimes capped at 25% of the purchase value, depending on the company.” So I guess if you pay in a four-month-installment on time, it could make sense, but that seems like a super risky gamble.
- jongjong 4y agoA few months ago, I bought a car with a loan. I was surprised to learn that essentially all lenders offer a fixed 8% interest rate... When annual inflation is at least 10% in my country and reserve bank interest rates are on the rise. If it was a variable interest rate, that would present some risk. But it's not even the case. It's literally a fixed 8% annual rate over 5 years (by which point the loan will have been fully paid). So assuming that I can keep my income in line with inflation, it ends up becoming easier to repay my loan as inflation progresses. It's not quite the same situation for people with real estate mortgages as their rate is variable (or fixed only for a couple of years; so not really fixed when you consider that the loan is 20 to 30 years...) and their repayments increase along with the reserve bank interest rates. My repayments are constant and my debt is being inflated away as we speak. I bought a basic/small, but good quality car as I think it will hold its value well due to its focus on utility and fuel (cost) efficiency.
- toast0 4y ago
- JumpCrisscross 4y agoDo we have data on what products are being financed? Online grocery orders can include a variety of things, not all of which we’d conventionally call groceries. It's problematic if BNPL is financing daily meals; another if it's a luxurious dinner or pots and pans.
- PuppyTailWags 4y agoI would consider pots/pans to be part of groceries. How is anyone expected to cook if they can't spend the money on a 20-30$ frying pan?
- fastaguy88 4y agoAnother percent-based set of statistics that tells us nothing. How many Americans were using buy-now pay-later a year ago? 10,000? 50,000? (out of 200 million). A 40% increase in market share from what? A market share of 0.0001%? Did the BNPL amount stay the same, and the market shrink (and what is the market -- on-line purchases or total grocery sales?) And there are 10% more orders, but 19% less revenue. So perhaps fewer people are paying more because of inflation, or more, how can we tell? Perhaps written by Chat-GPT with the proviso that no actual information be provided.
- __derek__ 4y agoThe article notes: > everyday BNPL orders, including groceries, accounted for barely 1% of all [BNPL] purchases in 2021. Presumably the share for groceries alone didn't increase meaningfully in 2022, or that would have been noted for effect, so we're looking at less than 1.4% of all BNPL payments for groceries. Of course, there was also the secular increase in online grocery orders: > This trend may be partly due to the fact that Americans are simply spending more money on groceries online. Online grocery spending grew by nearly 27% year over year to $8.4 billion in February.
- velavar 4y ago>> everyday BNPL orders, including groceries, accounted for barely 1% of all purchases in 2021. > Presumably the share for groceries alone didn't increase meaningfully in 2022, or that would have been noted for effect, so we're looking at less than 1.4% of all BNPL payments for groceries. It could just mean that BNPL as a product was not much used a couple of years ago, no? It could just mean that these folks would merely then put their groceries on a revolving credit card (which in many ways is worse). It doesn't necessarily mean folks are shifting to riskier forms of debt?
- __derek__ 4y agoAh, my pull-quote is confusing because it leaves out the context that the denominator here is all BNPL purchases, not all purchases. That said, you're right that this could also just be a product of new offerings, as BNPL in point-of-sale systems is newer than BNPL online.
- rhacker 4y agoI've been using buy now pay later for like 20 years, since that's how long I've had a credit card.
- deleted 4y ago[deleted]
- Waterluvian 4y agoOn the topic of being able to afford food, Pizza Pizza in Canada sent a flyer to my door about "Fixed Rate Pizza." The entire thing is a tongue-in-cheek take on "we won't change the price of our pizza for a year" but they make it sound like a mortgage. You can even go online and get pre-approval for your pizza.[1] To me, this smells of some marketing people thinking they're really really clever. It's fairly well-executed. But just completely tone deaf. Some people are losing their homes. They're trying to feed their children[2]. This is not the time to goof about the absolute fucking dystopic idea of food mortgages. [1] https://www.pizzapizza.ca/fixed-rate-pizza/ https://www.pizzapizza.ca/fixed-rate-pizza/ [2] My wife volunteers at our kids public school's snack program (Canadian schools generally don't provide lunches). The school has a very wide range of income levels, so you get everything from kids who ignore the snacks (fruit, veggies, sometimes cereal bars), to kids who are sent to school with an empty container to bring food home. Luckily there are some really good social systems in place to try to remove this responsibility from a child, but it's soul crushing to see. This footnote is tangential but I'm having a very raw moment of anger, sadness, and hope.
- aidenscott2016 4y agoI get a 403 from the UK
- Waterluvian 4y agoInteresting that they 403 you. https://ibb.co/JnpnCr4 https://ibb.co/JnpnCr4 https://ibb.co/dQF85hN https://ibb.co/dQF85hN
- JumpCrisscross 4y ago> completely tone deaf. Some people are losing their homes It looks more like a joke about inflation than mortgages.
- Waterluvian 4y agoThe webpage linked above includes "How do I apply?" and "get pre-approved." There's even a graphic of a home with a balloon when talking about inflation and literally mentioning mortgage rates. Perhaps I'm feeling sensitive to this and it is a funny joke. Naturally the audience can decide for themselves. =)
- AlexB138 4y agoIs there some real material different between BNPL and a regular credit line? People often seem up in arms about BNPL, and I'm not clear on what is uniquely insidious about it. Are the rates more predatory than a credit card, for instance?
- SilasX 4y agoThis. It doesn't seem materially different from a credit card: if you pay within a certain window, no interest charges. It's just that BNPL is associated with being unable to afford it at the moment. And, not surprisingly, comedians used to make exactly that joke! When fast food chains like McDonald's started accepting credit cards, they would joke that if you pay with one, it's like you're saying you can't afford the meal all at once.
- tracker1 4y agoFor me, it's clawing back a couple percent against the tx fee, they effectively charge every other customer.
- sonotathrowaway 4y agoI’ve heard that the form of credit that is used is somehow inferior, such that it reflects badly when judging your credit history. I have absolutely no idea if that is true or how I’d even ascertain the veracity, so don’t quote me.
- thwayunion 4y agoBNPL doesn't make much sense if you have access to typical quality credit lines. The x% cash back on groceries, plus a month of interest on deferred payment, is probably a better deal than the extra duration on the credit line you might get from BBPL. The major difference between some BNPL apps and credit cards is that the apps don't require a credit check. So, y'know, there's a certain segment of the market they are targeting. I think the ethics are fairly mixed -- access to capital is important and capital is expensive to some people for a really good reason. Of course there are fairness issues and predatory lenders, but there's a balance between the two concerns. But the risk modeling for CCs and BNPL are quite different. I expect there to be a BNPL blow-up at some point.
- deleted 4y ago[deleted]
- darth_avocado 4y agoFor some reason the narrative seems to be that BNPL is bad for you, but I would argue they are objectively better than credit cards. Or in the worst case as bad as credit cards. The fees on BNPL tends to be capped in most cases while you could carry cc debt for infinite amount of time at high interest rates with no cap on how much you pay.
- deleted 4y ago[deleted]
- paxys 4y agoI have my share of problems with big tech, but none of them compare to the rotten garbage that is sectors like payday loans and BNPL. These are industries exclusively set up during rough economic times to prey on the poor. Just think about BNPL for 3 seconds. How do they make money? By selling people shit they can't afford, waiting for them to miss payments, and charging hefty interest and fees – sometimes totaling up to as much as the product itself. You can argue "it is legal" "they signed the contract" "they should have known better” all you like, but just like payday loans it is a social ill that we need to deal with.
- jdiez17 4y agoSo... same business model as credit cards?
- comte7092 4y agoCredit cards also make substantial money on transaction fees, but yes you are correct.
- thwayunion 4y agoHuge caveat is that some BNPL services don't require credit checks.
- otikik 4y agoDon’t they work under very different regulatory frameworks though? (As in: banks have some regulation)
- dwater 4y agoDifferent customer base. These loans are generally more expensive and sold to people who can't qualify for credit cards. So yes, same business model but with the "Predatory" knob turned up.
- Jochim 4y agoAFAIK the interest rates on credit cards are nowhere near that of even regulated payday loans. The lack of interest on most cards if you repay in full each month can also make them a useful buffer if you have short term liquidity problems, ironically the problem that payday loan companies claim to solve. Payday loan companies as they operate now belong in the class of companies that should simply be destroyed. Put betting shops in there as well.
- jollyllama 4y agoI wonder to what degree this is causing price inflation and skewing price signaling
- josephcsible 4y agoIf you get offered BNPL with no interest or extra fees, isn't it a no-brainer to take it, even when you could afford to just pay the whole cost up front?
- Jochim 4y agoNot sure about the US but in the UK it's now supposed to show up on your credit report. You also need to be the type of person that keeps on top of your finances. The main trap for inexperienced/impulsive people is getting locked into paying for more than they can afford. Without BNPL they might look at their balance and decide not to buy the item. BNPL introduces a different type of calculation where you now "it's only $5/mo", and need the experience to consider "how many more $5/mo payments do I have". The other problem is people with a volatile monthly income. They might be fine paying $50/month for a few months but due to their industry or changes in their financial situation they're now stuck with a commitment they can't afford and otherwise wouldn't have had without BNPL.
- amerkhalid 4y agoPerhaps also consider any points and other freebies like extended warranties that when using credit cards.
- jlarocco 4y agoTechnically you're right, but is it worth the trouble for groceries?
- paxys 4y agoYou are missing out on credit card rewards. You don't get the consumer protections (disputes, extended warranties and more) offered by credit cards. It doesn't help build your credit history. And even if you think you can make all payments on time, if you happen to miss a single one then you are going to be hit by like 30% interest and other fees.
- josephcsible 4y ago> It doesn't help build your credit history. Will missing payments of it hurt your credit history? If so, why is such one-sided credit reporting legal?