Consumers are expected to use “buy now, pay later” payment plans heavily this holiday season, a forecast that bodes well for retailers but that has credit experts again sounding alarm bells.
The short-term loans often come with consumer-friendly interest rates and allow shoppers to make an initial payment at checkout, then pay the rest in installments, typically over a few weeks, even months. That can be appealing to a shopper buying multiple gifts for family and friends during the holidays, particularly if they’re balancing other debt such as student loans or credit cards.
Data shows younger consumers and those with difficulty accessing credit use the loans most frequently. Used responsibly, the installment plans increase financial inclusion, according to the Federal Reserve Bank of New York. But the Fed and some analysts say key features of the plans can make borrowing too easy and saddle consumers with excessive debt.
Short-term installment loans drove $6.4 billion of online spending in October, up 6% year over year, according to a recent Adobe Analytics report on online shopping. Adobe expects usage to peak in November with spending of $9.3 billion, including a single-day record of $782 million on Cyber Monday. Overall, Adobe estimates one in five Americans plan to use buy now, pay later plans to purchase holiday gifts.
It’s a lack of self control on a lot of people’s part, and financial institutions are loving it I’m sure.
You’re not wrong but let’s keep in mind these people should have more expendable income to begin with. Virtually everyone is making less than they should be, and they’re strangled by cost of living. They shouldn’t use credit so irresponsibly, but they shouldn’t be in a position where they need too just to be able to participate in our consumer culture.
And I don’t mean, like, “mindless consuming”, I mean basic stuff like “I’d like to own a couch that isn’t torn to shit” or “I’d like to own a car under 150,000 miles”
I agree fully with that. I use one of my credit cards for groceries just to keep padding in my bank account for on hand cash for emergencies (down payment on a car in case mine goes out as you stated, for example) I don’t feel like I should have to do that but here we are. There’s a fine balance I have to walk financially because of stagnant wages, which is a huge part of the problem.
