I would never encourage someone to take on debt lightly. But BNPL is not a bad alternative for those who must. Most consumer credit is a function of credit scores. People with low scores or no access to credit pay high, often borderline usurious rates: payday loans, title loans, credit card penalty rates, auto loans, personal loans, credit builder “loans” (a truly awful product), the list goes on. People with high credit scores pay much less and can easily refinance. BNPL is available at the same rate to all consumers. Effectively, because merchants pay the lender through exchange fees, those with good credit subsidize those with bad credit (just like cash payers subsidize credit card payers). For people who live paycheck-to-paycheck this can be a good option to spread payments without paying egregious finance charges. Yes, BNPL late fees can negate this benefit. Instant credit can be a dangerous temptation. But used wisely BNPL is a better option than most.
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I would never encourage someone to take on debt lightly. But BNPL is not a bad alternative for those who must. Most consumer credit is a function of credit scores. People with low scores or no access to credit pay high, often borderline usurious rates: payday loans, title loans, credit card penalty rates, auto loans, personal loans, credit builder “loans” (a truly awful product), the list goes on. People with high credit scores pay much less and can easily refinance. BNPL is available at the same rate to all consumers. Effectively, because merchants pay the lender through exchange fees, those with good credit subsidize those with bad credit (just like cash payers subsidize credit card payers). For people who live paycheck-to-paycheck this can be a good option to spread payments without paying egregious finance charges. Yes, BNPL late fees can negate this benefit. Instant credit can be a dangerous temptation. But used wisely BNPL is a better option than most.
Post: Pain Postponed
Link to comment from December 25, 2021