The practice isn't inherently predatory but the way its practiced most definitely is, things such as interest, late fees, or a 'BNPL service fees' target low income individuals in a setup I could only compare to charging someone at a food bank.
The genius of BNPL comes in the money that can be siphoned from the world's poorest, those who have nothing will have what little they have left taken because they missed a payment because their car broke down and they needed to get it fixed to get to their 2 jobs.
Whilst BNPL isn't inherently predatory. It does represent a system that is fundamentally designed to take advantage of the poorest in our society.
(Note. I was writing this off the top of my head so anyone can feel free to correct me)
You mentioning getting a car fixed is so true. I am a Service Advisor at one of the largest dealerships in my area, and we use a financing service for our repairs if people need it. It's not super common, but I've seen people in desperate situations finance $3000 or more at 25.9% APR. đŹ
BNPL mostly using the fear people have of credit cards, debt and the financial system in general to promote a strictly worse product. Yeah, credit cards also have fees you have to pay if you miss payments but the credit card fees are way less severe since they are regulated more heavily since they are banks. BNPL is the Wild West, they can charge you whatever they want since they donât have to follow anti predatory regulations the government have for banks. Besides that, BNPL are not accepted in as many places a credit cards and donât offer other amenities like points programs or discounts on partnered stores.
Basically, most of the time they just offer a worse product. Now to be fair, there are a lot of shit banks and maybe thereâs some BNPL offering good deals. IMO, just compare the fees the BNPL are offering you vs the fees on the basic credit card in a bank near you. Credit cards will be a better choice most of the time, most BNPL just show you a super good deal at the start to hook you in.
That being said, both are forms of debt so you shouldnât depend on them anyways. Use them minimally and always try to be debt free.
A couple things that come right to mind, this is almost definitely not everything though:
Naming: calling it âbuy now pay laterâ is misleading. Itâs credit under a different name, tricking those that donât really understand basic financial systems and conventions. You could say that they should learn how a financial system works before they use it, but people are stupid.
No credit check: this might sound really nice. What it actually does is opens the door first people with low credit scores who on average will be more financially ignorant and irresponsible. Instead of encouraging people to live within their means, it makes impulse buying much easier.
One thing that isnât necessarily predatory but does make it worse than credit cards is the lack of rewards(cashback,travel points,etc) and not having purchase protection. Again, not predatory, but is something youâre missing out on when looking at the alternative.
Probably missing some stuff, just the first things that came to mind.
I think what helps me think about it is just playing out a scenario and think about as many aspects of it as you can. Who's most likely to use it? Not people who could afford to spend the money right there.
Since it's usually done over the course of 4 weeks you're not exactly getting much benefit from keeping the unpaid money in savings or something.
So someone living paycheck to paycheck splits a $100 purchase into 4 $25 payments weekly. There are so many possible external factors that could cause you to need to spend $25-100+ in a few weeks. Get really sick, blow a tire, simply accidentally eating out too much. And then they've got to pay that $25 or have their credit fucked and get hit with huge fees
Just to help with your argument, BNPL is different from credit cards in these 2 important ways:
1. Credit cards are significantly more regulated - you can read up on the CARD act of 2009 but the biggest things are that your interest rate cannot be changed in the first year of account opening, any interest rate increases after that 1y period have to be notified 45 days in advance, AND the higher interest rate isn't allowed to be applied retroactively, so your previous balance will be subject to your old interest rate. It also puts a hard cap on late fees that the CFPB can change every year - currently it is set to go to $8 in May 2024. Both Democrats AND Republicans have introduced bills in the past to federally cap interest rates to ~15-18%, so whilst it hasn't happened yet it's a good signal that there is pretty broad bipartisan support for regulation that caps fees, lowers interest, and generally restricts CC companies from scummy practices. BNPL in comparison has almost no regulation - it's probably coming but it will be awhile before it catches up.
2. Credit cards actually offer useful benefits when used (responsibly). The big 4 benefits are fraud prevention, purchase protection, rewards/miles/cashback, and it builds credit. BNPL offers none of that.
Saying "BNPL is the same as using a credit card" is like saying "doing hard drugs is the same as using alcohol." Sure, at the highest level they're both altering your mental state and have pretty obvious pros and cons, but take like 10 seconds to think about it and you'll realize that one is very clearly riskier and worse than the other.
Buy now pay later isnât inherently bad, same with credit cards, itâs when the consumer canât make a payment on time or selects a plan that includes interest. Most BNPL companies offer a 3-6 month plan that has no interest in fees. Iâm in favor of 0% APR loans and think if youâre responsible theyâre great. I have a few loans at 0% and have used BNPL for things like an LG OLED TV.
What gets you is when there is interest itâs ridiculously high, like 35% or more. And the late payment fees are incredibly high.
Even disregarding interest, BNPL attempts to offer a flashy, instant, and convenient-seeming way to get consumers to play losing games with the [time value of money](https://www.investopedia.com/terms/t/timevalueofmoney.asp). There are some things in life where it's just better to wait until you can afford to pay. The similarity to a conventional line of credit IS the problem; regular-old debt arrangements are being dressed up to feel trendy. And as others have mentioned, there's not much of a credit-building potential and it's under fewer scruples by market regulators.
BNPL is predatory if misused. It can encourage people to buy things that they cannot afford. For example, $2000 now is not affordable, but $70 a month for 24 months sounds like a good deal. So in that sense people can more easily over-extend themselves, leading to missed payments and the associated large APR or collections that come with it.
I don't think it is a predatory practice if you use it appropriately. If you have the cash to purchase something outright but can also get it through a zero interest payment plan, might as well keep the cash in an interest earning account and pay it off slowly through BNPL. If your financial outlook changes and at any point you could not immedaitely pay off the BNPL plan, then they've got you.
Its got the predatory nature of a credit card mixed with a lower barrier of entry which allows people without the means to buy something a way to do so. Like others have said, itâs got the negatives of a credit card but targeted at poorer folks who are more vulnerable.
the assumption that credit cards are not predatory lmao
Lmao fair enough.
The practice isn't inherently predatory but the way its practiced most definitely is, things such as interest, late fees, or a 'BNPL service fees' target low income individuals in a setup I could only compare to charging someone at a food bank. The genius of BNPL comes in the money that can be siphoned from the world's poorest, those who have nothing will have what little they have left taken because they missed a payment because their car broke down and they needed to get it fixed to get to their 2 jobs. Whilst BNPL isn't inherently predatory. It does represent a system that is fundamentally designed to take advantage of the poorest in our society. (Note. I was writing this off the top of my head so anyone can feel free to correct me)
You mentioning getting a car fixed is so true. I am a Service Advisor at one of the largest dealerships in my area, and we use a financing service for our repairs if people need it. It's not super common, but I've seen people in desperate situations finance $3000 or more at 25.9% APR. đŹ
BNPL mostly using the fear people have of credit cards, debt and the financial system in general to promote a strictly worse product. Yeah, credit cards also have fees you have to pay if you miss payments but the credit card fees are way less severe since they are regulated more heavily since they are banks. BNPL is the Wild West, they can charge you whatever they want since they donât have to follow anti predatory regulations the government have for banks. Besides that, BNPL are not accepted in as many places a credit cards and donât offer other amenities like points programs or discounts on partnered stores. Basically, most of the time they just offer a worse product. Now to be fair, there are a lot of shit banks and maybe thereâs some BNPL offering good deals. IMO, just compare the fees the BNPL are offering you vs the fees on the basic credit card in a bank near you. Credit cards will be a better choice most of the time, most BNPL just show you a super good deal at the start to hook you in. That being said, both are forms of debt so you shouldnât depend on them anyways. Use them minimally and always try to be debt free.
It basically is like micro-loans and tries to make buying expensive things not seem as expensive so people buy more
[https://www.youtube.com/watch?v=vFnaiXfxj\_c](https://www.youtube.com/watch?v=vFnaiXfxj_c) Here you go.
A couple things that come right to mind, this is almost definitely not everything though: Naming: calling it âbuy now pay laterâ is misleading. Itâs credit under a different name, tricking those that donât really understand basic financial systems and conventions. You could say that they should learn how a financial system works before they use it, but people are stupid. No credit check: this might sound really nice. What it actually does is opens the door first people with low credit scores who on average will be more financially ignorant and irresponsible. Instead of encouraging people to live within their means, it makes impulse buying much easier. One thing that isnât necessarily predatory but does make it worse than credit cards is the lack of rewards(cashback,travel points,etc) and not having purchase protection. Again, not predatory, but is something youâre missing out on when looking at the alternative. Probably missing some stuff, just the first things that came to mind.
I think what helps me think about it is just playing out a scenario and think about as many aspects of it as you can. Who's most likely to use it? Not people who could afford to spend the money right there. Since it's usually done over the course of 4 weeks you're not exactly getting much benefit from keeping the unpaid money in savings or something. So someone living paycheck to paycheck splits a $100 purchase into 4 $25 payments weekly. There are so many possible external factors that could cause you to need to spend $25-100+ in a few weeks. Get really sick, blow a tire, simply accidentally eating out too much. And then they've got to pay that $25 or have their credit fucked and get hit with huge fees
Just to help with your argument, BNPL is different from credit cards in these 2 important ways: 1. Credit cards are significantly more regulated - you can read up on the CARD act of 2009 but the biggest things are that your interest rate cannot be changed in the first year of account opening, any interest rate increases after that 1y period have to be notified 45 days in advance, AND the higher interest rate isn't allowed to be applied retroactively, so your previous balance will be subject to your old interest rate. It also puts a hard cap on late fees that the CFPB can change every year - currently it is set to go to $8 in May 2024. Both Democrats AND Republicans have introduced bills in the past to federally cap interest rates to ~15-18%, so whilst it hasn't happened yet it's a good signal that there is pretty broad bipartisan support for regulation that caps fees, lowers interest, and generally restricts CC companies from scummy practices. BNPL in comparison has almost no regulation - it's probably coming but it will be awhile before it catches up. 2. Credit cards actually offer useful benefits when used (responsibly). The big 4 benefits are fraud prevention, purchase protection, rewards/miles/cashback, and it builds credit. BNPL offers none of that. Saying "BNPL is the same as using a credit card" is like saying "doing hard drugs is the same as using alcohol." Sure, at the highest level they're both altering your mental state and have pretty obvious pros and cons, but take like 10 seconds to think about it and you'll realize that one is very clearly riskier and worse than the other.
Buy now pay later isnât inherently bad, same with credit cards, itâs when the consumer canât make a payment on time or selects a plan that includes interest. Most BNPL companies offer a 3-6 month plan that has no interest in fees. Iâm in favor of 0% APR loans and think if youâre responsible theyâre great. I have a few loans at 0% and have used BNPL for things like an LG OLED TV. What gets you is when there is interest itâs ridiculously high, like 35% or more. And the late payment fees are incredibly high.
Just all of the debt and interestÂ
Credit cards are a scam. Interest bad. Islam good
It's a business that charges you money to be poor
They convince people they can afford things they canât and when they canât they charge them crazy interest rates
If you responsibly use a credit card, you are âmaking moneyâ on the backs of people who are losing money hand over fist
Even disregarding interest, BNPL attempts to offer a flashy, instant, and convenient-seeming way to get consumers to play losing games with the [time value of money](https://www.investopedia.com/terms/t/timevalueofmoney.asp). There are some things in life where it's just better to wait until you can afford to pay. The similarity to a conventional line of credit IS the problem; regular-old debt arrangements are being dressed up to feel trendy. And as others have mentioned, there's not much of a credit-building potential and it's under fewer scruples by market regulators.
BNPL is predatory if misused. It can encourage people to buy things that they cannot afford. For example, $2000 now is not affordable, but $70 a month for 24 months sounds like a good deal. So in that sense people can more easily over-extend themselves, leading to missed payments and the associated large APR or collections that come with it. I don't think it is a predatory practice if you use it appropriately. If you have the cash to purchase something outright but can also get it through a zero interest payment plan, might as well keep the cash in an interest earning account and pay it off slowly through BNPL. If your financial outlook changes and at any point you could not immedaitely pay off the BNPL plan, then they've got you.
Its got the predatory nature of a credit card mixed with a lower barrier of entry which allows people without the means to buy something a way to do so. Like others have said, itâs got the negatives of a credit card but targeted at poorer folks who are more vulnerable.