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.
You know what I learned in eighth grade? The great depression was partially caused by easy to acquire financing that so many people could never repay. Good thing we learned from that mistake.
You know what I learned from 2008? You can be recklessly irresponsible with money and likely get a pass.
Know what I am learning from 2019 onwards? You can borrow tens if not hundreds of thousands of dollars to go to college and then batch and moan until a politician tries to use others people’s money to pay it back
We did, actually. Not as much as we should have but we did learn some things. Commonplace consumer credit was a somewhat new thing, at least on that scale, with virtually no regulations or safeguards. Because…well, regulations were not in vogue. Laissez-faire was the standard.
We definitely have more guardrails in place nowadays. Not enough, but more than the 1920s.
I don’t either. I’ve already told the family Christmas is gonna be light. Other than what I can scrounge up, instead of the “buy now, pay later” model, I’ve adopted the “don’t buy what i don’t need, pay never” one.
Skyrocketting prices on everything means I use what i have until it is absolutely unusable/unfixable anymore. And my credit cards stay mostly clear except for emergencies.
It’s a lack of self control on a lot of people’s part, and financial institutions are loving it I’m sure.
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.
For a long time there wasn’t much incentive to save money as savings interest rates were horrible. Even now, with inflation money is worth less in the future, so things get more expensive over time. So for things you actually need I think it often evened out.
Then there’s the want stuff. You don’t know how long you have in life to experience stuff, so there’s some cost to putting things off where you might never get to do or use or play or whatever. Honestly dying with a lot of debt and no assets seems like a nicrme screw you to the banks and system. You might not ever pay it back, but you got the benefits.
