Concerns Over “Buy Now, Pay Later” Plans Among Young Americans
The “buy now, pay later” (BNPL) approach is on the rise among younger Americans, yet there’s a growing debate about its financial wisdom.
Hailey Sachs, a personal finance influencer with more than a million followers, voiced strong concerns about BNPL during an appearance on “Fox & Friends.” She labeled the practice as “predatory.”
“I don’t think you should use ‘Buy now, pay later’,” Sachs stated. “If you need to buy something, just use a credit card. Many credit card companies offer a ‘pay over time’ option with no interest.”
Sachs emphasized that credit cards provide significant advantages that BNPL lacks, such as consumer protections and the ability to build credit history.
With the BNPL service, consumers can break down their payments into several installments rather than paying the full amount upfront. However, if they aren’t careful about making timely payments, late fees can be imposed.
Expected to hit record transaction volumes this year, BNPL was initially marketed as a lower-risk alternative to credit cards. Still, financial experts warn that relying on these payment methods can lead to excessive spending and quick debt accumulation if not managed properly.
A recent LendingTree survey revealed that since April, more Americans are turning to BNPL for everyday needs like groceries. Alarmingly, 40% of users reported missing payments on at least one loan in the past year.
Factors contributing to this trend include rising prices, soaring interest rates, and the re-emergence of student loan payments, which resumed two years after being paused during the pandemic.
Sachs pointed out that these conditions have made deferred payment plans appealing to a generation grappling with financial challenges. “Gen Z is dealing with so much inflation while wages aren’t keeping pace. This is one way to get what you want,” she noted. “But, of course, there’s a price to pay.”
According to the LendingTree survey involving 2,000 consumers aged 18 to 79, nearly half of American adults are using BNPL services like Klarna and Affirm. Most participants were Millennials, but Gen Z and Gen X were also significant users.
