I can see a future where a BNPL loan is not offered if the signals the checkout page collects indicates wealth, since they don’t have an issue of cash flow stopping a purchase. Imagine a loan that has a credit score maximum, not a minimum.
Given current interest rates, I take that deal WHENEVER it's offered.
It's no different to the practice of using a credit card for everything and then paying off in full a month later because the credit card interest is lower (often zero if you pay off within a month) than the mortgage interest.
I suspect this is where some buyers will get into trouble. Theyll think they made a payment, or they miss a notification that tells them to send this month's payment to servicer X not Y, and before they realize, boom they are in default and owe all the interest.
I wonder if this is going to change.
Equally, I find it weird that companies can ding your credit for not paying but have no obligation to report on-time payments. It should be both or none.
https://www.nytimes.com/2025/03/23/business/doordash-klarna-...
What does need to happen however is that these inputs are properly weighted such that those using FICO can make appropriate decisions. Similar to credit cards, numerous BNPL-purchases do not necessarily indicate that the debtor is in financial trouble. They could merely be using the services for the other conveniences they offer. Whereas seeking numerous loans is usually a negative metric.
However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later.
At some point, you run out of hours available and the house of cards collapses.
i.e., credit can buy time in the nearly literal sense, you can do an hour's work in half an hour because the money facilitates it, meaning you can now make more money. If instead of investing in work you're spending on play, then you end up with a time deficit.
or, e.g. you can buy 3 franchises in 3 months instead of 3 years (i.e. income from the 1 franchise), trading credit for time to make more money, instead of burning it. It'd have been nice had they taught me this in school.
If somebody can BNPL or otherwise credit lifesaving medicine (such as the many people in the USA who die from inability to afford healthcare), that's not play money because they don't want to work.
However, I stood in line behind someone who financed a bowl of noodles with afterpay, and it got me thinking. Those are the folks I'm talking about.
Neat.
In my experience, the average American has no concept of saving money, and those below average even less.
It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it. What do you see in practice? You see people dashing over to the nearest rent-to-own rims shop. (If you don't know poor people, you may not know such businesses exist.)
> Almost none of these people have the kind of collateral needed to use credit to truly transform their lives, and the government assistance for that is seriously lacking in the US
I doubt that greater availability of credit, perhaps facilitated through government subsidy, is what precludes the majority of such people from transforming their lives.
It's easy to say "why don't they save more?" from an upper or middle class stability, but when the price of everything keeps going up, the police are out to get you, and healthcare is just a fast track to debt that will take away any savings or assets you managed to have, what's the point?
Congratulations, you've just discovered that human beings are not perfect rational actors.
Furthermore, the common pattern where poorer people spend money as soon as they get it is, in fact, rational when you look at it from their perspective rather than your own (which, as with most people attempting to moralize to poor people about their choices, appears to be a perspective of "you should be doing absolutely everything you can to maximize your net cash flow").
First of all, people need things like little luxuries. A Starbucks coffee here. A joint to smoke there. We are not, and cannot make ourselves, robots who live only to produce.
Second of all, they know, from experience going all the way back to childhood, that if they have an opportunity to splurge a little now and don't take it, they'll lose that opportunity.
Third of all, they similarly know that regardless of whether they splurge on an ice cream cone today because it's 90°F out, whatever financial trouble that comes tomorrow to eat up the little surplus that makes that possible will still put them in debt. Being in debt $150 instead of $145 just doesn't make that much difference. And if they wanted to avoid that particular debt entirely, they'd have to give up 30 separate instances of "I have an extra $5 today, let me get something to make life a little less shitty".
The only solution to the problems that lead to people not being able to save is increasing the amount of money they get paid.
I disagree.
You use credit to buy a car or buy a house when you don't have the cash to buy them up-front.
It's not so you can use them to make money, it's so you can use them to enjoy life.
> At some point, you run out of hours available and the house of cards collapses.
Only if you go too far. The point is to buy things knowing what they'll cost monthly and for how long, and to budget those as part of your monthly expenses. As long as you can always handle those, you will never run out of hours available and it's not a house of cards. Nothing collapses. You pay off your car; you pay off your mortgage.
You seem to be treating this as something black-and-white when it's not. It's an incredibly useful tool when used with budgeting. Not "to make more money" but to have a better life for you and your family for when it matters the most. Nobody wants to wait until the kids have graduated from college to be able to buy their first house.
And even with credit cards -- yes you generally want to be paying them off in full monthly. But if you want to take a vacation a couple months before you could otherwise fully pay for it, it's really nice to have that convenience too. Not to mention covering some expenses for a few months if you lose your job. They're a tool to be used responsibly.
I used to hate to take the position that government should save people from themselves, but I've moderated a lot on it. Some people clearly cannot use credit responsibly.
Similar thinking for a house. A lot of people when buying a house go into it with the assumption that it is an appreciating asset that will gain value over time. Yes there are other factors of course like wanting to live closer to schools or in the suburbs/good areas, etc. But regardless this is commonly to facilitate a life that lends itself to you continuing to be able to make money comfortably.
Regarding vacations, no financial expert recommends using a card without the intention of not paying for it. If your plan is to book the vacation on credit for anything other than the benefits of your credit card points systems you might as well not use it at all. And all recommend not using credit cards and instead an emergency fund if you lose your job.
A house and a decent car are not primarily about making money. They're about your quality of life.
> And all recommend not using credit cards and instead an emergency fund if you lose your job.
And if you already used your emergency fund on, say, a medical emergency...?
Now consider what would happen if you invested that $6,300 for 30 years instead of spent it on interest. You’re losing out on tens of thousands of dollars in total lifetime wealth.
When you borrow money to “enjoy life” it can quickly end up costing 2x what it would if you spent the money outright, even if you borrowed at low rates.
And before you say “buy an old beater”, then you have to contend with an unreliable car that may cause you to be late to work and get fired. It’s also much easier and cheaper to get a car loan for a newish car than to borrow money to fix a car.
It'd be nice if kids were an affordable choice for anyone expect Elon Musk, but you know, here we are. \o/
Just to make the money you are making now, you need some stuff, be it a phone or a car, home AC, oven or even a washing machine at home (you can't go to work hungry in dirty clothes).
If you don't have the money to pay with cash, you'll be buying that oven/stove with whatever delayed/monthly payment option is available.
Yes, if you're buying franchises you can do the "make more money" calculations, but if your kids are going to be hungry soon, you often have no choice.
Is your position that taking debt to buy a house is bad unless you can sell it for a profit? Is working for the mortgage lender to accomplish that not worth it?
You can avoid it by renting, but then you’re just working for the landlord, so there’s no avoiding it.
It's not clear to me how they pick people to lend to.
0% financing costs the retailer 8%(ish) of the total amount, which is how the lender makes their money.
So in your case, the retailer didn’t want to lose that much of their margin.
The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report.
They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.
For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle).
It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe it's because I do pay it, and if I didn't there would be 200% APY or something.
- No credit checks.
- Longer payment period - usually 2-3 months with no interest.
firesteelrain•3h ago
ZYbCRq22HbJ2y7•2h ago
"The industry has long believed that consumers using BNPL responsibly should result in positive credit scores, as the majority of users are paying back in full and on time."
steveBK123•2h ago
The real question is what are the delinquency and default rates for BNPL as compared to other forms of consumer credit.
Given the previous understanding that it didn't hit your FICO, the retailer subsidy as a sales lead, and the types of products people were financing.. one might assume worse..
firesteelrain•1h ago
UltraSane•2h ago
dh2022•2h ago
To me this seems like a new product that would target a different consumer than the one that makes payments on time. But I would like if someone challenges this view. Thanks!
loeg•1h ago
Slightly longer repayment time frames. (Multiple months instead of just one.)
firesteelrain•1h ago
UltraSane•1h ago
Tadpole9181•1h ago
For small puchases with short repayment periods? Not a clue.
firesteelrain•1h ago
charcircuit•1h ago
bitmasher9•1h ago
2. BNPL often has short durations (3 months) so it’s not a long term problem for people with BNPL if they pay it all back.
bediger4000•1h ago