Buy Now, Pay Later Apps vs. Credit Cards: The Pros and Cons

Buy Now, Pay Later Apps vs. Credit Cards: The Pros and Cons | WSJ

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Күн бұрын

Buy now, pay later companies like Affirm, Klarna and Afterpay boomed during the pandemic as consumers looked for an accessible alternative to credit cards. But even as their customer bases grow, these companies are struggling to turn a profit. PayPal, Apple and even credit card companies themselves are trying to get in on the action.
WSJ explains how these services work, how they differ from traditional credit card payments and why some consumers have concerns.
0:00 Breaking up full payments
0:39 Rise of buy now, pay later
3:00 Consumer concerns
4:01 Buy now pay later companies
4:51 What’s next?
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Пікірлер: 124

@ritokazoriv 11 ай бұрын

Giving people credit who wouldn't be able to normally ... sounds awfully similar to the sub-prime mortgage lending crisis

@kumarapillay3122 11 ай бұрын

whenever ppl make companies that can only operate by finding loopholes around the law, eventually when it blows up, the laws becomes stronger and not the companies, thats essentially what happened in the subprime mortgage

@KMon99 11 ай бұрын

yes, but no in the sense that these are all small transaction. I just don't think the aggregate is enough to trigger a crisis/concession by its own even if they fail at 100%.

@beepboopbeepp 11 ай бұрын

@@KMon99 only way i could see this go wrong would be if they demanded the money from consumers all at once due to some crisis

@Blaze6108 11 ай бұрын

It's literally the same thing. 1. Loan money to everyone and their mother, even when they clearly can't repay them. 2. Claim your are totally as "valuable" as the combined theoretical payout of these loans w/ interest. 3. Trade your "value" as financial assets and derivatives for big cash on the market. 4. Everyone and their mother inevitably fail to repay the loans, "value" of assets instantly goes to zero, market crash. 5. You made billions at the low low cost of ruining the economy. This seems to be the new MO of the financial class. They endlessly create debt, sell the debt as an asset to get rich, then laugh as the economy implodes because they filled it with toxic debt.

@Blaze6108 5 ай бұрын

It's the endless conundrum of personal finance. On one hand, we're told we need to be responsible and not accrue tons of debt because debt has inherent costs to you and incurs in possible unexpected issues. On the other hand, the banks who control the financial system want us to buy as much debt as possible since they make money from it, which is why your credit score goes up when you accrue debt and then pay it on schedule by incurring in the full interest.

@davidcantor293 11 ай бұрын

BNPL makes sense with appliance or other large purchases however, if you need to use it for a pair of shoes then you clearly cannot afford it.

@oko2312 11 ай бұрын

I’m only using BNPL to purchase all necessities, as $1 today is worth more than $1 tomorrow, but this only applies if ur buying necessities. People that use BNPL to buy luxuries should let their parents handle their money lol.

@Stratus41298 11 ай бұрын

It can be helpful to offset the upfront payment though with a few smaller ones.

@user-fd8vu2yl1f 11 ай бұрын

💯

@houchi69 11 ай бұрын

And this is why Americans will never be out of debt, when we continue to promote this kind of irresponsible spending habits.

@romainbourque 11 ай бұрын

the whole capitalist economy is based on consumer debt. imagine having to fork over 50,000$ on the day you buy your new car, think they'd sell a lot of vehicles?

@KingBritish 11 ай бұрын

You owe 13tn you ain't getting out of NO debt.

@CinematographyLischka 11 ай бұрын

The practice of "buy now, pay later" is prevalent in business transactions where bills are payable within 60 days.

@Tokoroa3420 11 ай бұрын

I was a portfolio analyst for one of the BNPL companies, just a warning, it is much harder to get out of BNPL debt than credit card debt. We did the math and it also scares us.

@mikea5745 11 ай бұрын

What happens if you just don't pay BNPL debt? Do they garnish wages? Will they take you to court? Or will it just be a ding on your credit history?

@marc-andreservant201 11 ай бұрын

@@mikea5745Most likely they will sell your debt to a collection agency, who will do all of the above. The good news is that you can often negotiate with those crooks, but it won't undo the damage to your credit score. Klarna might not show up on your credit report, but a judgement from a debt collector definitely will.

@bozskosamu 7 ай бұрын

Why and how is that?

@roadrunner6224 11 ай бұрын

If you only bus something, because it gives you the ability to pay in installments and it isn't a house, maybe rethink if you should really buy that.

@karmasutra4774 11 ай бұрын

I agree, but if there is no interest or fees it can help you not have to pay for something all at once. I did do it for my theme park annual pass. But normally don't

@Rust_Rust_Rust 11 ай бұрын

I've done this with phones and other expensive electronics and I wind up paying it before the last payment installation. Buy now pay later helps with expensive purchases so I don't have to pay it all upfront and can still buy the item right now rather than wait a few months.

@amirmirzaei3940 11 ай бұрын

@@Rust_Rust_Rust here is an financial advice from me. if you can't afford it up front now, then don't ever buy it. cause you have no idea what will happen in 60 days time, you might have to all the sudden spend that money on a random emergency which you couldn't do anything to avoid it

@Rust_Rust_Rust 11 ай бұрын

@@amirmirzaei3940 I typically keep an emergency fund with 6 months of expenses for things such as that.

@smug_slime 11 ай бұрын

⁠@@amirmirzaei3940yes and he/she’s just do exactly that and more.

@IgorDellaPietra 11 ай бұрын

"never buy something with money you dont have" thats what my mom taught me, and what i live by.

@user-lt5no1xt1z 3 ай бұрын

Then never have a mortgage on a house, either

@Truth-of-the-matter 11 ай бұрын

Pros and Cons to everything. I've used Affirm many times (and usually pay off the loan long before it "ends"). I've paid little in interest overall. Often my purchases have come with a 0% interest rate which you wouldn't see from a credit card.

@FIDEL_CASHFLOW_ 11 ай бұрын

If you pay off the credit card at the end of every month you will have a 0% interest rate on that as well. You should not be using any form of credit whatsoever if you can't afford to pay off the card in full at the end of every month

@Seanpfree 11 ай бұрын

A great way to transfer wealth from you to companies

@Viviko 11 ай бұрын

… as a millennial… I think BNPL is fiscally irresponsible. If it was some real estate or something, sure. But, BNPL… I avoid it at all cost.

@J2theP2theG 11 ай бұрын

i agree! only buy things that you can afford at the current moment.

@LeadLeftLeon 11 ай бұрын

BNPL shows how poor Americans are now

@mikea5745 11 ай бұрын

As a millennial, you should remember what happens when people who can't get approved for traditional credit are given it anyway in order to purchase real estate. Not a good idea.

@Viviko 11 ай бұрын

@@mikea5745 As a millennial, I don’t like to look at the past. I can’t control it anyways. My plan is to just expand my web dev business enough (or start a separate SaaS company) that can eventually allow me to buy real estate with cash. I can’t control that our parents got Real Estate for cheap. I can only control what I do. Unfortunately whst I can do ( and have to do) involves giving our dear parents the middle finger and going my own way.

@karmasutra4774 11 ай бұрын

I like the credit card no interest for 18 months deals I get on my credit cards. Using that for my new roof. But I always pay it by the due date to avoid fees

@alexandrugheorghe5610 11 ай бұрын

Hi 😁

@gustavocalixtodesouza7537 11 ай бұрын

Crazy to think that here in Brazil it's been pretty normal for a long time to use credit cards to pay in installments...

@bryanpascual3543 11 ай бұрын

I fell for BNPL but then I realised it's better to save up for something/somexperience you want first is a wiser choice!😎

@krishp1104 11 ай бұрын

if it's at 0% interest I don't see any negatives.

@michael2275 11 ай бұрын

Enjoy staying poor

@NotKimiRaikkonen 11 ай бұрын

If it's at 0% they're making their money some other way. Likely through a high mark-up

@vladislavkaras491 5 ай бұрын

Thanks for the video!

@ruzzelladrian907 3 ай бұрын

I only use credit cards. I use it like a debit card. That's the key. But these buy now, pay later services are quite useful for those who want to spread out the cost of paying for their purchase in increments.

@zamudio5595 11 ай бұрын

I use Affirm and it’s great 👍

@pacho359 11 ай бұрын

If done correctly, this is a win win for both parties. But their intended user base is usually just 5% of the total user base. The rest use it as a glorified payday loan

@rachmadsuhartono 11 ай бұрын

Pay later services are also booming in my country of Indonesia

@Semper_Iratus 11 ай бұрын

The deeper in debt you go, the more of a slave you become.

@njiomonansichristianfreder6374 11 ай бұрын

💯

@navajyotichetia8968 11 ай бұрын

In most countries credit is regulated- anyone or anyone's store cannot claim legal liability for a credit given if they are not registered and structured as a credit company

@mgh62000 11 ай бұрын

I only use Klarna for bnpl.

@monkee_rocks 11 ай бұрын

we at Monkee are big believers in Save Now Buy Later as the responsible alternative to Buy Now Pay Later. We support people to reach their consumption goals without debt.

@sa-heal 11 ай бұрын

Hi I don’t want to sound irrelevant but I am getting into youtube video making recently and I really like the background music going on when lady explains things. I think it can suit in my videos so can I ask to get any link or file to get that tone please.

@ScottMaday 11 ай бұрын

Here's an idea... if the only way you can afford a $100 pair of shoes is through a BNPL service... maybe you can't actually afford them and need to rethink your purchase decision.

@user-ct4oo7lb2u 4 ай бұрын

❤ 0:14

@haridasification 11 ай бұрын

The RBI has put brakes on it

@egde 11 ай бұрын

This business should focus on more expensive items like houses or cars. I believe there's potential in this market, but we shouldn't go after a market that's already filtered for risk, as it would just load people up with more debt😢

@gustavostabe2490 11 ай бұрын

Oh lending to people with no real background checks, that’s never gone horribly wrong before....

@Edmund. 11 ай бұрын

unless you live by weekly wages, buy now pay later is like paying in full, i use it time to time for promotions, i guess it's different country by country

@aelius1987 11 ай бұрын

Please increase the loudness of the audio.

@ngocquynhnhuhuynh3227 11 ай бұрын

Selling is better than not selling ✊🏼

@wizaaeed 11 ай бұрын

Isn't this what the government has been doing for the past 20+ years, I mean 30trillion debt is a buy now pay later, kind of

@whymeeee 11 ай бұрын

yeah but its like they have to pay themselves in the future, its like you borrow from yrself in the future smth like this

@runabath 11 ай бұрын

Bubble wait for the pop

@johancancino2410 11 ай бұрын

I personally use BNPL and if i'm satisfied with the purchase i pay it right away, idk why i like it better than buying with my own money and data on random sites

@5thElem3nt 11 ай бұрын

Yes, that's how i do it, too. When I never bought something on a site before, I usualy use BNPL. Later, if I feel safe with a shop, I usually switch to an other service, which is cheaper for the sller ( and in the long run for me, too).

@untouchable360x 11 ай бұрын

More like "Buy now, Pay forever."

@jaspioncreizi7178 11 ай бұрын

Installment payments are pretty common in Brazil for a long time. But you should use this tool with responsibility, otherwise you'll go bankrupt

@stephaniehale946 11 ай бұрын

*Did you even talk about the business model?*

@jimrobinson9979 11 ай бұрын

My take away is that it's the same as credit cards, they are charging the retailer a small fee to allow customers to use the service.

@I-Know-Best 11 ай бұрын

As an investor, I would be afraid of companies that advertise these BNPL options heavily at checkout and while shopping on their websites. This is a short term solution to increasing their sales that can backfire heavily if they don’t get these debtors to pay back what is owed. Loosening your credit policy to meet certain revenue targets is a huge red flag to creditors and investors of these companies. Especially if they aren’t also increasing their allowance for bad debts on their balance sheets. To see if this is happening with a stock, look at their most recent 10-K which has balance sheet data from the past 3 years (as required by the SEC). Then, see if their Accounts Receivables (AR) is increasing year over year faster than their Cash account. This might tell you if they’re selling too much on credit.

@MarkWTK 11 ай бұрын

thanks for the lesson :D

@Entertainment- 11 ай бұрын

You don’t understand how BNPL works. The retailer gets paid immediately in full, it’s the BNPL company that’s on the hook.

@I-Know-Best 11 ай бұрын

@@Entertainment- In that case, I can't see these companies lasting through any economic situation where the consumer pulls back from major discretionary spending. They are thriving right now because people still have their jobs and paychecks coming in; it's just inflation stopping them from being able to afford the products that BNPL is being used on. Once that income goes away, consumers will be on the hook for these monthly short-term loan payments that have probably become a sizeable chunk of where their paycheck was going. And with student loan payments resuming, I see the belt getting tighter and tighter for Gen Z, putting them in an incredibly precarious situation if markets were to turn.

@ThatMetalAsian94 11 ай бұрын

As long your careful and able to pay back use it, its not bad but can be dangerous is you over do it or cant pay back

@joec1920 11 ай бұрын

More ways for consumers to pay means more power to the consumers. I would like to know whether it's possible to use BNPL with a credit card. That way, I get a longer grace period and let money work for me instead of the other way.

@tiagoquental1029 11 ай бұрын

It's a dangerous game you're playing my friend, a very dangerous one. Good luck, kisses

@ThatMetalAsian94 11 ай бұрын

It fine to use a bnpl if your using it for one to two items, 1 want and 1 need but can be dangerous if your using it to buy everything you want think you'll pay off your outrageous loan

@ReflectionOcean 6 ай бұрын

- Consider BNPL for accessible installment payments without interest (0:15) - Understand the risks and lack of regulation compared to credit cards (2:59) - Merchants may pay higher fees for BNPL services as interest rates rise (4:36) - Watch for the evolving competition as BNPL firms offer more services (5:01)

@HiTechBoy96 11 ай бұрын

Just pay that small amounts back on credit card?

@shanegreen6384 11 ай бұрын

and they don't affect your credit score

@robert8311 3 ай бұрын

Just use a reward credit card and only buy what you have in your account This easily can get out of hand

@shunnybunny 11 ай бұрын

the funny thing is that depends on where on the credit card bill cycle you are at, credit card can also be up to 60 days no interest...

@InderjitSingh12 11 ай бұрын

seems like predatory money lending idea like payday loans

@leandrowngo 11 ай бұрын

This methodology is also loosely how Chelsea Football Club can afford to buy so many players.

@auro1986 11 ай бұрын

advertising in wsj is behind buy now pay later apps

@brockhubbard6336 11 ай бұрын

If you don’t have the money, just don’t buy it🤷🏼‍♀️

@SHOTIMELV 11 ай бұрын

tell that to our senator who are increasing the debt celling

@spazzmaticus1542 11 ай бұрын

Creditors employing the boiling a frog technique

@MediSpring 3 ай бұрын

a credit card is a "pay later" option.

@farkasambrus5741 11 ай бұрын

This is very alarming, they themselves say that they give credit to people who normally wouldn't be eligible. They also admit that they cover their costs by acquiring new customers, which is basically a pozi scheme

@jesseinfinite 11 ай бұрын

So buy now pay later is Americans discovering EMIs? That has been in India for ages?

@DesmondShuford-fy2bj 11 ай бұрын

These business models go to the banks and get loans and then issue them out to the Millinieal family.

@RappingManualYT 11 ай бұрын

Adding more debt options to a generation accustomed to living beyond their means and looking good while doing it. Bravo

@amirmirzaei3940 11 ай бұрын

I think if they are too stupid to control themselves, they should live their whole life in debt. thank god the supreme court didn't forgave their debt only for them to get more on top

@denisruskin348 11 ай бұрын

Hate this culture, same for credit cards. If you can't afford something, work and then get it.

@luisnin3780 4 ай бұрын

It amazes how ignorant both professors, analyst and people are with BNPL. The BNPL business has been in place with Merchants and small business for years. Many Merchants are paid in 3 months minimum with zero payment usually until the 3 months have passed. It also amazes me how the federal government has gone after BNPL without touching banks that charge 38% on credit cards…..and the biggest issue is with the banks and not with the BNPL is the amount of debt the consumers already have, but the fed does not make any mention of this. BNPL loans are small in comparison what you can buy with a credit card, yet everyone is here and in the market is like sheep believing everything negative about BNPL. Ant the most positive with BNPL is the zero interest that most people get and avoid fees which are normally charged by the credit cards…. It shows who is in charge of our economy and anyone who challenges the credit card gravy train…..will be crushed….and the dumb consumers believe the banks….it shows how dumb the consumer really is, they rather pay fees and interest instead of having in the discipline to use BNPL a better alternative……

@samueladler8233 11 ай бұрын

0:35 "Young millenial" those two don't mean the same thing anymore. The oldest millenials are 42! That's older than the average American.

@stevenluo9516 11 ай бұрын

Oh look at all those Affirm employees in the comments section. If only people start using the 4 function calculator, let alone a smartphone, and all those Affirm employees will be out of a job soon. Reading glasses are some tools that may also help send these employees filling out unemployment insurance benefit applications soon.

@psnisy1234 7 ай бұрын

Poor plebs

@dsz1195 11 ай бұрын

It took me 20 seconds to realize this business is not sustainable

@LeadLeftLeon 11 ай бұрын

BNPL shows how poor Americans are now

@NotKimiRaikkonen 11 ай бұрын

More like financially illiterate. If most people wrote out a budget and saved their leftovers, they'd be fine.

@leszekkot3373 11 ай бұрын

yay another method to get in trouble financially. can't afford it, don't buy it until you have money saved up to pay off your credit in full or pay cash.

@kwhandy 11 ай бұрын

it's ridiculous to hear such of pessimist thought from mizuho ppl while they also invest in bnpl company(in asia) i think you guys contactinh the wrong person

@rya. 11 ай бұрын

Just use ur debit card 😅.

@Collinsv8 11 ай бұрын

What an irresponsible business model to fuel consumer culture and increase the prevalence of personal debt. If you don't have funds to pay for clothes today, it might be difficult tomorrow as well. It's a slippery slope.