'Buy now, pay later' services are dangerous trap for young Americans, financial expert warns
"Buy now, pay later" plans are rapidly growing in popularity among young Americans, but not everyone is convinced they’re a smart financial choice.
Haley Sacks, a personal finance influencer with over a million followers online, issued a chilling warning about BNPL plans on "Fox & Friends" Tuesday, calling the practice "predatory."
"My take is that you should not use ‘buy now, pay later’ at all," Sacks said.
"If you need to finance something, use a credit card and a lot of credit card companies have ‘pay over time’ options with 0% interest."
Sacks argued credit cards offer important benefits BNPL plans don’t, such as consumer protection and the opportunity to build credit.
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"Buy now, pay later" services let buyers split purchases into multiple installments instead of paying the full price upfront. However, if users aren’t careful to make payments on time, they may face late fees.
They’re expected to hit record transaction volumes this year after initially being marketed as lower-risk alternatives to credit cards. But financial experts warn that reliance on these payment plans can lead to overspending and a rapid accumulation of debt if consumers aren’t on top of them.
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A LendingTree survey from April found that more Americans are using BNPL services for everyday essentials like groceries, and that 40% of users admitted to missing a payment on at least one loan in the past year.
Factors that could be leading to the shift are elevated prices, high interest rates, and student loan payments, which resumed less than two years ago after a stop during the COVID-19 pandemic.
Sacks says these factors are part of why these types of deferred payment plans have resonated with a struggling generation of young people.
"Gen Z is facing so much inflation, wages have not kept up, and this is a way to actually be able to get things that you want," she said. "But of course, then you're paying the price."
According to the LendingTree survey of 2,000 consumers aged 18 to 79, nearly half of American adults have used a BNPL service such as Klarna or Affirm. Millennials made up the largest share, but Gen Z and Gen X weren’t far behind.