NYC Is Making People Homeless With High Living Expenses and Uptick in Buy Now, Pay Later Financing Offerings

New York City has figured out a new way to send people to the poor house, and although it is partially the result of dilly dallying from those who could turn the sinking financial ship we are on around, the problem is that modern debt based capitalism (Buy Now, Pay Later financing) has created a new way to bankrupt people… possibly forever.

Buy now, pay later (BNPL) is a type of short-term financing which allows consumers to make purchases and pay for them at a future date. BNPL is generally structured like an installment plan or money lending process which involves consumers, financiers and merchants. Financiers pay merchants on behalf of the consumers when goods or services are purchased by the latter. These payments are later repaid by the consumers over time in equal installments. The number of installments and repayment period varies depending on the BNPL financiers.

BNPL has been criticised for instilling a false sense of financial security in consumers, which could lead to impulse shopping and they might end up spending money they do not have. A 2024 Bankrate survey found that among those polled, 56% of BNPL users had issues with overspending, missing a payment or regretting purchases. Influencer marketing of BNPL platforms on social media adds to the attractiveness of using BNPL credit to purchase items, and influencers have been criticised for normalising debt by marketing it as “fun”, thereby encouraging overspending.

https://youtu.be/evK00xN6z_Q

BNPL has been described as “similar to a credit card but without the hassles of an application process, card-swiping infrastructure, and separate limits for purchases and cash withdrawals”. Retailers that partner with BNPL financiers can offer customers the option to pay for purchases using BNPL. If a customer opts to complete the purchase using BNPL, the financier will typically carry out a soft credit check on the customer, and return a decision within seconds. The financier pays the merchant if approval is received, and offers the customer various repayment options. These may include delaying the payment for a short period of time, or spreading the full balance over several smaller payments.

The service is offered for free to the customer, assuming repayment is made. BNPL financiers take a cut from the purchase price of anything they help the merchant to sell. This fee tends to be higher than typical credit or debit card transactions, with processing fees ranging from 2% to 8% per transaction, compared to 1.3% to 3.5% for credit cards.

When consumers fall behind on payments, late fees are typically charged by their financiers, and persistently delinquent accounts may be sold to debt collection agencies.

In March 2024, NBC News reported consumers ages 35 and under comprise 53% of “buy now, pay later” users, but just 35% of traditional credit card holders.

Consumers who use BNPL generally are less protected by regulation when compared to other financing options. The BNPL industry remains unregulated or self-regulated in many countries.

Although BNPL payments are usually interest-free, financiers have been noted to report defaults more frequently than successful repayments to credit-rating agencies, potentially putting the credit rating of consumers in jeopardy.Checks conducted by financiers on credit bureau scores have also been critiqued for being scant. These checks are cursory, if conducted at all, and mainly evaluate income statements only.

SOURCE: https://en.wikipedia.org/wiki/Buy_now,_pay_later