The CEO and chief strategist of Qi Research, Danielle Dimartino Booth, identifies where inflation strikes the most difficult consumers to “earn money”.
Buy now, pay subsequent payment solutions have increased in popularity in the current economy, the industry providing for an increase of 12.2% on an annual basis to reach $ 122.26 billion this year only, according to Research and Markets.
By 2030, the American purchase now, the subsequent market is expected to reach $ 184.05 billion.
The main players are affirmed, Afterpay, and Klarna, which is expected to launch a first public offer on Friday and list its shares on the New York Stock Exchange under the “Klar” symbol.
Companies increased at a time when the Americans were affirm persistent inflationHigh interest rate and student loan payments, which resumed in October 2023 after a break due to the Pandemic COVID-19.
Experts warn the hidden purchase risks now, pay later
Consumers have exploited the platforms because they allowed them to pay in several equal payments in a few weeks or months. In many cases, they are also without interest.
The application of the Swedish payment supplier Klarna is seen on a smartphone. (Jonas Walzberg / Picture Alliance via Getty Images / Getty Images)
Buy now, subsequent services have become a pillar of the retail sector. But it is more and more integrated into the travel, health care and electronics industries, more for consumers looking for flexible financing options.
A March Wallethub survey revealed that around 55% of Americans used the purchase now, pay later (BNPL), with 22% due to a BNPL supplier.
Among those who used the service, 19% have had several loans both in the past year, and 19% have incurred late costs or interest after miss a payment.
An icon of the Klarna application on a mobile phone organized in London, in the United Kingdom, Thursday January 21, 2021. (Hollie Adams / Bloomberg via Getty Images / Getty Images)
A separate ticketing survey revealed that more than half of the adults who used the service encountered problems such as excessive expenses, missed payments and buyer’s remorse.
These results emphasize that if the BNPL services offer flexibility, they also include risks depending on how you use them.
“Sometimes it is a viable way to access an affordable credit and to spread the impact of a big purchase. Other times is a ticket to spend too much,” said Ted Rossman, main analyst in the industry. “We can encourage ourselves to focus on payments rather than the total cost of property, and this can lead us to spend more than we should.”
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The purchase now, the subsequent remuneration services have announced as a “softer alternative to credit cards” which can be accompanied by high interest rates. However, Rossman said that the service “behaves more credit cards over time”. For example, Affir and Klarna have debit cards that can be transformed into temperament loans.
In addition to that, Rossman explained that the service “is only four interest -free payments over six weeks, with many of these plans which last longer and the load of interest rates similar to credit cards.
In addition, consumers can also be affected with late costs if they do not have the funds to cover the payments. Martha Callahan, certified financial planner at FBB Capital Partners, based in Maryland, previously told Fox Business that over time, if a consumer maintains missing payments, he could very easily be given to a debt collector,
“It is similar to the use of a credit card where you make the purchase now, but when the time comes to pay this debt, if you do not have the money at hand to make the payment. You just dig in a deeper financial hole,” said Callahan, adding that he can hurt someone’s credit.
