The buy now, pay later movement

As I hear more and more advertisements about “buy now, pay later,” I have to admit that they make me smile every time. For over 23 years now, as part of my efforts to help people be more financially responsible, I have talked and written about the importance of focusing on needs vs. wants, avoiding impulse buying, and only buying and doing things that you can afford.

So, I see this “movement” as just the latest creative marketing attempt to encourage people to buy things they can’t afford, and often don’t need, by removing some of the “pain of paying.” However, unlike credit cards, which provide the same service for too many Americans, there is no interest incurred as you pay in installments over weeks or months. As a result the purchase is not more expensive. That’s a good thing. However, almost two-thirds of BNPL users say they buy jewelry and other “want” items they’d otherwise avoid, according to a survey by the consumer data tracking firm Cardify, and nearly half of BNPL users say they spend between 10% and 40% more than they would if they were using a credit card. That’s not a good thing!

According to incharge.org, here is how it works. “BNPL companies team with merchants to offer an installment option when you check out. It’s usually 2-to-4 payments that are automatically withdrawn from your debit card account, though you can use a credit card under some plans.

“When you check out, you give the BNPL Company your name, address, phone number and birth date. Instead of a traditional credit check, you are approved or rejected based on an algorithm.

“Companies don’t divulge what criteria goes into their algorithms, but like credit cards, they want your business, so the algorithm probably will give you the benefit of any payoff doubt.

“You essentially get a mini-loan. It’s quick, simple, tempting and makes immediate financial sense. Unlike credit cards, the retailer picks up the processing fees instead of the consumer.

“What’s in it for Walmart, Macy’s, Sephora and thousands of other retailers? BNPL customers usually buy more stuff.”

So, when you are using Klarna, Sezzle, Zip Pay or any of the other BNPL services, please stop for a moment and thoroughly think through your purchase before you make it.

On a different subject, “the rich get richer” — that has been highlighted, perhaps more than ever by the pandemic. As I write this column, this last week the Dow closed over 32,000 for the first time ever, closing Friday, March 12 at 32, 778. I don’t know if this will continue, but here is another idea for that unneeded stimulus payment if you are going to get one — invest it with some professional advice. In addition, if your children will result in you receiving a check that you don’t need, consider putting the money into their college fund, savings account, or even investing it for them.

Another example of the “rich get richer” phenomenon during the pandemic is that in 2020, according to the personal-finance website WalletHub.com.’s latest credit card debt survey, Americans excelled in paying off credit card debt, getting rid of a record $82.9 billion in debt. This is a major accomplishment, considering that consumers have added an average of $54.2 billion in credit card debt per year over the past 10 years. Clearly, this is in large part a function of not being able to spend as much during the pandemic as we have stayed home and businesses have been shut down. However, this pay down has also, no doubt, for the most part been by Americans who have not been seriously financially disadvantaged by the pandemic, because they have not lost a job or income, and perhaps they have even received a stimulus check.