RE: LeoThread 2024-11-29 11:46
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Gen Z is drowning in debt as buy-now-pay-later services skyrocket: 'They're continuing to bury their heads in the sand and spend'
Internal data shows member credit card balances are up more than 50% for Gen Z and millennial members since March 2022, when the Fed started raising interest rates.
The data firm Adobe Analytics predicts shoppers will spend 11.4% more this holiday season using buy now, pay later than they did a year ago. The company forecasts shoppers will purchase $18.5 billion worth of goods using the third-party services for the period Nov. 1 to Dec. 31, with $993 million worth of purchases on Cyber Monday alone.
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Buy now, pay later can be particularly appealing to consumers who have low credit scores or no credit history, such as younger shoppers, because most of the companies providing the service run only soft credit checks and don’t report the loans and payment histories to the credit bureaus, unlike credit card companies.
This holiday season, buy now, pay later users can also feel more confident if a transaction goes awry. In May, the CFPB said buy now, pay later companies must adhere to other regulations that govern traditional credit, such as providing ways to demand refunds and dispute transactions.
To use a buy now, pay later plan, consumers typically sign up with bank account information or a debit or credit card, and agree to pay for purchases in monthly installments, typically over eight weeks or more. The loans are marketed as requiring no or low interest, or only conditional fees, such as for late payment. Klarna, Afterpay and Affirm are three of the biggest buy now, pay later companies.
But consumer advocates warn that shoppers who sign up for the payment plans using a credit card can be hit with more interest and fees. That’s because the shopper opens themselves up to interest on the credit card payment, if it’s carried month to month, on top of any late fees, interest, or penalties from the buy now, pay later loan itself. Experts advise against using a credit card to pay for these plans for this reason.