9 ms·

One reason is that someone’s or a company’s income doesn’t always align perfectly with when they want to buy things. When we're talking about financing the con

One reason is that someone’s or a company’s income doesn’t always align perfectly with when they want to buy things. When we're talking about financing the construction of a new downtown office tower, a new apartment complex, or the unexpected maintenance of your business's whole auto fleet, I can absolutely see the argument that credit is a mechanism of greasing the wheels of the economy and allowing things to happen that otherwise would not be able to happen if everyone had to wait until they were table to save all of the cash and pay upfront. This logic doesn’t change just because the thing being financed is a burrito. When we're talking about food, the absolute most basic human need, I start to question whether or not this is actually a good thing and is instead just a temporary band-aid over a much more serious economic problem that would be better off getting solved more permanently with a different economic or political tool.

wyager 1y ago
Expected debt levels are more a function of personal time preference/utility nonlinearity w.r.t. wealth than they are a function of ambient economic conditions. When broke people win the lottery, they usually end up broke again.
sweeter 1y ago
I think that is about the most gentle way you can put it. This is an echo of 2008 and the notion that this is normal is so absurd to me. It comes off as super out of touch. Financing groceries is dystopian.
- calmbonsai 1y ago
  I agree. Just because you can price, trade, and provide liquidity for "a thing" doesn't mean "that thing" can, or should, be financialized.
  - shermantanktop 1y ago
    But but but “complete market”! The deployment of Econ-degree lingo doesn’t help the case.
    - calmbonsai 1y ago
      Yup. Different "rules" apply at different scales. Something, something quantum finance.
ChadNauseam 1y ago
Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america. In brazil, many people don’t eat meat because it’s too expensive, and get the vast majority of their calories from beans and rice. you can also do this in america, but almost no one does outside of college students because food is cheap enough relative to wages that people can generally afford to eat a wide variety of foods. The bigger problem with BNPL, in my view, is that a lot of people are not able to understand the concept of credit. I knew people in my hometown who got a credit card, and their reaction to having a $3k credit limit was the exact same as if they had gotten $3k deposited into their bank account. I’m honestly not sure whether they understood that they didn’t just randomly get given $3k. I saw this happen multiple times. But it sounds very patronizing to say the “there’s a lot of poor people who don’t understand credit, so we need to prevent them from having access to any so they don’t get the chance to screw themselves”, so I understand why no one does.
- shermantanktop 1y ago
  “Fear of sounding patronizing” sounds like a cocktail party problem. If that’s stopping someone - being made fun of by another member of their elite class - that’s a recipe for failure.
  - akoboldfrying 1y ago
    Being careful not to sound patronising towards the poor in public is one of the most ironclad unstated rules of wealthy social groups in the West. Breaking it immediately reveals one to be a member of the outgroup ("gauche"/"nouveau riche"/"tasteless"/"a philistine"), which will cause other wealthy people to break ties for fear of being tarnished by association. Since relationships with other wealthy people are a cornerstone of becoming and remaining wealthy, there is a massive incentive not to do this. I think the underlying reason is that being patronised is very antagonising, and the poor generally outnumber the rich, who must ultimately depend on them in a variety of ways.
    - shermantanktop 1y ago
fennecbutt 1y ago
You're right, and anybody that tries to convince us otherwise is the enemy, or a friend of the enemy. Now our world is all about maximum profit extraction. Interest. How about no more public education, you get a loan for it. What, that's what your taxes pay for? Well, it's not enough, too bad. The masters say that you can't possibly pay enough tax to give your child an education. But they'll give you a loan for it, with interest. Coming very soon to a reality near you. And I thought we were done with being peasants.
bcoates 1y ago
There's two obvious "legitimate" reasons to use credit: to smooth out expenditure volatility (a big purchase like a house, an emergency) and to smooth out income volatility (a temporary lack of a job). If you are suddenly sans job and living on savings/unemployment/charity etc., but have a perfectly reasonable expectation of long-term average income much above your short-term situation, financing a burrito makes sense--you’re being cash-flow efficient (extending your runway, if you will) Also, in my personal experience, a new job often brings various costs (food, clothes, transportation, relocation, etc) long before the paychecks show up. There was a time in the early 2000s where being able to klarna a tank or two of gas until my paycheck landed would have been extremely useful to me
- nothrabannosir 1y ago
  If you can’t afford a luxury item, it is fiscally irresponsible to take out credit to buy it. Credit is legitimate if you use it for an investment (or expense) which will get you higher returns than the interest payments. Not for luxury goods. Whether a delivery burrito is a luxury good or a basic necessity is apparently up for debate.
intended 1y ago
Yeah. I get the argument for pricing risk. That’s a genuine improvement on the state of the art. I dont get NINJA loans, because they represent an unfair fight - a sophisticated loan originator and sales team against people without the background and skills to judge that risk
- potato3732842 1y ago
  The person taking out the loan doesn't need to judge the statistical risk or develop an algorithm to compute it, just the individual one. It's like the insurance when you rent a piece of equipment. The insurance is $8 every time because they judge that to be the statistical risk. Sometimes I'm doing something sketchy and take them up on it. Sometimes I'm not and I don't. The problem is a very simple one on my side but very complex on theirs.
yreg 1y ago
Convincing people to finance their groceries is absurd. Ideally, everyone should have a few months’ worth of income saved. And if they do, there's zero reason to finance a burrito. In the Western world, if you have a job but no savings buffer, it’s usually not due to extreme poverty—it’s often a lack of basic financial literacy. Klarna, et al. market in direct opposition to that education.
- twoodfin 1y ago
  I finance all my burritos: It’s fantastically more convenient than cash, incrementally builds my credit rating, & I capture some of the efficiency surplus via rewards points. The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.
  - mmillin 1y ago
    > incrementally builds my credit rating Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
    - margalabargala 1y ago
      > But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest. The person you replied to is doing exactly this.
    - SirMaster 1y ago
      Aren't most BNPL plans credit cards? How many credit card accounts are floating around out there compared to any other type of plan?
  - justincormack 1y ago
    Its not an "efficiency surplus" that you get via rewards it is a monopoly surplus.
windward 1y ago
That's funny, because food it my primary example for credit in everyday life and is probably the first place you've used it. Whenever you go to a restaurant and pay after eating, you're using credit. Credit is more effective and more ancient as a medium of exchange than money is.
- bluedino 1y ago
  Most people use credit cards vs debit card for daily purchases in the USA because it's a safer transaction and you get points.
  - yurishimo 1y ago
    Most people (statistically) are also broke. The points mean nothing if you’re paying 22% interest on the 3 other cards that you couldn’t even afford to do the balance transfer on. Banks only offer points because they make money on average. By using these products, you are directly benefitting from the financial illiteracy of the most vulnerable parts of our society. I refuse to be part of that system out of principal. Also, the Visa logo on your debit card applies all of the same benefits as the credit card in regards to risk management. The one time I had my card skimmed, I called the bank, the charges were reversed and they overnighted me a new card.
    - bluedino 1y ago
      Except for when say, your utility company withdraws the wrong amount from your checking account (using your debit card), causing you to be overdrawn, and then you have no money for two weeks while they sort it out. Of course, there's an argument against auto pay somewhere in there... Credit card you can just go on with your life.
wodenokoto 1y ago
I buy all my food on credit, using my visa credit card. But more to your point, your examples are absurd. You set the bar ridiculously high. Of course it is okay to buy a single car or a single apartment on credit, as a normal consumer. Getting finance is not the exclusive domain of large, corporate investments.

wyager 1y ago

Expected debt levels are more a function of personal time preference/utility nonlinearity w.r.t. wealth than they are a function of ambient economic conditions. When broke people win the lottery, they usually end up broke again.

sweeter 1y ago

I think that is about the most gentle way you can put it. This is an echo of 2008 and the notion that this is normal is so absurd to me. It comes off as super out of touch. Financing groceries is dystopian.

calmbonsai 1y ago
I agree. Just because you can price, trade, and provide liquidity for "a thing" doesn't mean "that thing" can, or should, be financialized.
- shermantanktop 1y ago
  But but but “complete market”! The deployment of Econ-degree lingo doesn’t help the case.
  - calmbonsai 1y ago
    Yup. Different "rules" apply at different scales. Something, something quantum finance.

ChadNauseam 1y ago

Food is a basic human need, paying someone to make a burrito for you and then hand deliver it to your house is not. There is no shortage of food in america. In brazil, many people don’t eat meat because it’s too expensive, and get the vast majority of their calories from beans and rice. you can also do this in america, but almost no one does outside of college students because food is cheap enough relative to wages that people can generally afford to eat a wide variety of foods. The bigger problem with BNPL, in my view, is that a lot of people are not able to understand the concept of credit. I knew people in my hometown who got a credit card, and their reaction to having a $3k credit limit was the exact same as if they had gotten $3k deposited into their bank account. I’m honestly not sure whether they understood that they didn’t just randomly get given $3k. I saw this happen multiple times. But it sounds very patronizing to say the “there’s a lot of poor people who don’t understand credit, so we need to prevent them from having access to any so they don’t get the chance to screw themselves”, so I understand why no one does.

shermantanktop 1y ago
“Fear of sounding patronizing” sounds like a cocktail party problem. If that’s stopping someone - being made fun of by another member of their elite class - that’s a recipe for failure.
- akoboldfrying 1y ago
  Being careful not to sound patronising towards the poor in public is one of the most ironclad unstated rules of wealthy social groups in the West. Breaking it immediately reveals one to be a member of the outgroup ("gauche"/"nouveau riche"/"tasteless"/"a philistine"), which will cause other wealthy people to break ties for fear of being tarnished by association. Since relationships with other wealthy people are a cornerstone of becoming and remaining wealthy, there is a massive incentive not to do this. I think the underlying reason is that being patronised is very antagonising, and the poor generally outnumber the rich, who must ultimately depend on them in a variety of ways.
  - shermantanktop 1y ago

fennecbutt 1y ago

You're right, and anybody that tries to convince us otherwise is the enemy, or a friend of the enemy. Now our world is all about maximum profit extraction. Interest. How about no more public education, you get a loan for it. What, that's what your taxes pay for? Well, it's not enough, too bad. The masters say that you can't possibly pay enough tax to give your child an education. But they'll give you a loan for it, with interest. Coming very soon to a reality near you. And I thought we were done with being peasants.

bcoates 1y ago

There's two obvious "legitimate" reasons to use credit: to smooth out expenditure volatility (a big purchase like a house, an emergency) and to smooth out income volatility (a temporary lack of a job). If you are suddenly sans job and living on savings/unemployment/charity etc., but have a perfectly reasonable expectation of long-term average income much above your short-term situation, financing a burrito makes sense--you’re being cash-flow efficient (extending your runway, if you will) Also, in my personal experience, a new job often brings various costs (food, clothes, transportation, relocation, etc) long before the paychecks show up. There was a time in the early 2000s where being able to klarna a tank or two of gas until my paycheck landed would have been extremely useful to me

nothrabannosir 1y ago
If you can’t afford a luxury item, it is fiscally irresponsible to take out credit to buy it. Credit is legitimate if you use it for an investment (or expense) which will get you higher returns than the interest payments. Not for luxury goods. Whether a delivery burrito is a luxury good or a basic necessity is apparently up for debate.

intended 1y ago

Yeah. I get the argument for pricing risk. That’s a genuine improvement on the state of the art. I dont get NINJA loans, because they represent an unfair fight - a sophisticated loan originator and sales team against people without the background and skills to judge that risk

potato3732842 1y ago
The person taking out the loan doesn't need to judge the statistical risk or develop an algorithm to compute it, just the individual one. It's like the insurance when you rent a piece of equipment. The insurance is $8 every time because they judge that to be the statistical risk. Sometimes I'm doing something sketchy and take them up on it. Sometimes I'm not and I don't. The problem is a very simple one on my side but very complex on theirs.

yreg 1y ago

Convincing people to finance their groceries is absurd. Ideally, everyone should have a few months’ worth of income saved. And if they do, there's zero reason to finance a burrito. In the Western world, if you have a job but no savings buffer, it’s usually not due to extreme poverty—it’s often a lack of basic financial literacy. Klarna, et al. market in direct opposition to that education.

twoodfin 1y ago
I finance all my burritos: It’s fantastically more convenient than cash, incrementally builds my credit rating, & I capture some of the efficiency surplus via rewards points. The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.
- mmillin 1y ago
  > incrementally builds my credit rating Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
  - margalabargala 1y ago
    > But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest. The person you replied to is doing exactly this.
  - SirMaster 1y ago
    Aren't most BNPL plans credit cards? How many credit card accounts are floating around out there compared to any other type of plan?
- justincormack 1y ago
  Its not an "efficiency surplus" that you get via rewards it is a monopoly surplus.

windward 1y ago

That's funny, because food it my primary example for credit in everyday life and is probably the first place you've used it. Whenever you go to a restaurant and pay after eating, you're using credit. Credit is more effective and more ancient as a medium of exchange than money is.

bluedino 1y ago
Most people use credit cards vs debit card for daily purchases in the USA because it's a safer transaction and you get points.
- yurishimo 1y ago
  Most people (statistically) are also broke. The points mean nothing if you’re paying 22% interest on the 3 other cards that you couldn’t even afford to do the balance transfer on. Banks only offer points because they make money on average. By using these products, you are directly benefitting from the financial illiteracy of the most vulnerable parts of our society. I refuse to be part of that system out of principal. Also, the Visa logo on your debit card applies all of the same benefits as the credit card in regards to risk management. The one time I had my card skimmed, I called the bank, the charges were reversed and they overnighted me a new card.
  - bluedino 1y ago
    Except for when say, your utility company withdraws the wrong amount from your checking account (using your debit card), causing you to be overdrawn, and then you have no money for two weeks while they sort it out. Of course, there's an argument against auto pay somewhere in there... Credit card you can just go on with your life.

wodenokoto 1y ago

I buy all my food on credit, using my visa credit card. But more to your point, your examples are absurd. You set the bar ridiculously high. Of course it is okay to buy a single car or a single apartment on credit, as a normal consumer. Getting finance is not the exclusive domain of large, corporate investments.