- About 30 million Gen Zers cuts their credit cards And opt to buy now, pay for subsequent services to pay their destiny spending habits. And although this can bring flexibility, experts warn that it could “trap” certain buyers in an excessive expenditure cycle and impulsive follies.
The love of young people for procrastination finally strikes a new phase: their finances.
Almost two out of five Gen Zers refuse to pay their next luxury bag or the McDonald’s delivery order in its entirety at the checkout – and opting instead to use Buy now, pay the services later (BNPL) To pay in weekly or monthly payments. And for the first time, these services even exceed the Long -standing popularity of credit cards.
They find BNPL a more flexible and simple way to stretch purchases on several pay checks, without accumulating high interest debt.
However, for a generation that Fight against financial literacy– including a love for “unhappiness“Their path through inflation stressors – experts warn that getting used to using payment plans can be a mask for a dangerous excessive expenditure game.
How to buy now, pay later works – and why the Z generation likes it
Forty-four percent of the Zers generation said that he had used the purchase now, paying subsequent services last year. It is the equivalent of around 30 million young people in the United States – and Sabrina Rozza is one of them.
The 25 -year -old tells Fortune She used the end to finance a vacation of $ 4,000 to the Dominican Republic. She says it was an “excellent alternative” to a credit card because she was able to make a deposit, then gradually perform the payments for six months.
“This has definitively helped budgeting. And in full transparency, at the time, I did not earn enough money to reimburse it on a credit card, “she said. “So, it just gave me more, like more leniency, to allow myself a vacation that I really wanted to continue.”
Rozza says most of her friends also use BNPL services, but especially to buy clothes. And they are not alone: in today’s economy, Half of the feeling of generation Z As BNPL helps them better manage their finances compared to other payment options. They say that its foreseeable financial flexibility and its simpler borrowing conditions are attractive.
Gen Z: Read the small characters
Popular services, as KlarnaAffirm and after the payment announces consumers largely the possibility of cutting their purchase via a loan which can be reimbursed in interest -free payments.
However, the small characters reveal that it is not necessarily as simple.
Their “Pay in 4” program divides purchases into four interest -free payments paid every two weeks for about two months via a loan that left credit reports (however, This could change). Depending on the price and the merchant, a deposit can be required and longer payment plans intend a thumb up to 36% apr.
In addition, missing any payment can lead to heavy costs.
That said, overall, customers tend to reimburse money over time to avoid any penalty. According to Afterpay, 98% of purchases do not incur delay fees and 95% of the payments have been paid in time. So no generation Z is probably not “Mother“As the reports have suggested, but if they are not careful, they could get into the habit of biting more than they can chew.
But financial experts are not sold on the advantages of BNPL
With the inflation and the uncertainty of the market that shake the economy, it is not a shock that generation Z explores new ways of shopping. In fact, this year, 60% of Coachella ticket buyers have opted for the Music Festival Payment Plan system – rather than paying entirely in advance, according to Display panel. And although it is not difficult to know how much purchases would have jumped if they had to pay entirely in advance, this indicates how popular payment plan has become.
“Buy now, Pay later encourages people to buy impulse,” explains Noah Kerner, CEO of the Acorns financial services company Fortune. “It encourages people to spend too much.”
For consumers on the fence of a purchase, being able to postpone the price to a later date is attractive; Actually, A study found That buyers tend to spend 20% more when the BNPL is offered. Buyers who are more than a simultaneous BNPL loan can quickly cause complicated financial problems, especially since there are now half a dozen popular BNPL companies.
Although credit cards have been options for decades and have their own drawbacks, they offer integrated railings: they present themselves at credit offices and often reward users with points or money. However, According to Afterpay51% of generation Z say that credit cards give them “Ick” and almost the same number of young people who could help them better manage their finances compared to traditional credit.
Basically, add Kerner, people should save for the things they want to buy because BNPL users can accumulate debt without impacting their credit scoring—Imbling excessive expenses easier to ignore.
“You should never spend more than what you do,” adds Vousson Kiel, a private wealth advisor in Synovus Bank. “Credit card debt is a terrible place.
“If it’s a lack and not a need, you should wait,” says Kiel.
This story was initially presented on Fortune.com
