Why Buy Now Pay Later Is More DANGEROUS Than Credit Card Debt

Why Buy Now Pay Later Is More DANGEROUS Than Credit Card Debt

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Buy now pay later it is the latest Trend In Consumer Finance that has taken the US by storm over the past few years These services like a firm clor and Afterpay typically allow you to split a Purchase from a partner Merchant into Four equal payments over a period of 6 Weeks with no interest and they do also Have some longer period loans that do Charge an interest rate between the year 2019 and 2021 use of buy now pay later Increased tfold according to the Consumer Finance Protection Bureau and Over the recent Black Friday sales Period use of buy now pay later Services Accounted for 7.2% of all sales that was A 25% increase from the year before you Can even use buy now pay later to pick Up cheap items like this $35 t-shirt When you need a loan for a $35 t-shirt It's time to stop and take a deep breath And make an assessment of your finances And realize that there are more Important things in life than Catzilla anyway in this video I want to Give you a rundown of who is using buy Now pay later and why I believe using a Service like this shows that you are Already in financial trouble so buy now Pay later Services have a few Characteristics like we said they are Interest free in their for payment model We'll get on to the longer payment plans In a minute they only perform a soft

Credit check when you apply so there is No damage to your credit score and they Typically don't show up as a loan on Your credit report unless you miss a Payment afterpay is the biggest of these Companies in the US but there's also a Firm CLA and now even Apple has come out With its own buy now pay later product But is putting off paying actually Helpful to people well in a recent Article from The Wall Street Journal They gave some reasons why people might Use buy now pay later versus simply Putting the charge on a credit card and Paying it all off at the end of the Month one is that the person wants to Hide a debt from their credit report Afterpay doesn't report to Equifax Rodriguez 31 said that is very appealing To me this was a person who was applying For a mortgage and didn't want to Increase their credit utilization for Fear of getting rejected then there are Other people using these services to Simply cover basic necessities like Grocery shopping in fact Shoppers use of These payment plans for necessary and Everyday purchases expanded 4 34% from 2020 to 2021 and why might they be doing This well we'll get into all the reasons In just a moment but first if you want To stay on top of your credit card Balances the sponsor of today's video Max rewards is a great choice they've

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The Credit Pros

Borrowers exhibit measures of financial Distress that are statistically Significantly higher than non-users some Examples include higher credit card debt And utilization rates so you can see Here that the buy now pay later users Have utilization rates on their credit Cards of 40 to 50% versus around 30% for Non-users so if you are already in Trouble on your credit card and don't Want to raise your utilization even more Why not take out a zero % APR loan that Is hidden from your credit report they Also found that users of buy now pay Later were much more likely to revolve Their credit card balances now this is Really the kicker for me because if you Are revolving a balance on a credit card I.E just paying the minimum payment or a Little bit more than that but not the Full balance and carrying the rest of That balance over to the next month you Lose your grace period so any charge That you put on that credit card starts Acing interest immediately you may not Have known this it isn't obvious but if You read the terms and conditions you Will find it in there I did a video on This once it looks like this it's called Something like credit card company's Dirty secret or something you can check It out on the channel I'll put it on the End card of this video so you can click Through and see it so if this wasn't the

Case and you were just paying your Balance in full every month and let's Say you made your purchase right at the Beginning of your billing cycle you'd Have about 30 days until you got the Bill with no interest and then you'd Have a grace period of typically at Least 21 days to pay that is a potential 51 days of 0% interest that is more than The six weeks you'd get with buy now pay Later it's actually seven weeks so for Someone with good financial habits such As paying credit cards in full every Month there's actually no need for buy Now pay later your credit card does the Exact same thing as long as you make the Purchase at the right stage within the Billing cycle and even if you purchase Later in the billing cycle you can still Get several weeks of 0% interest so These people are in debt they're Revolving balances on their credit card And paying interest and they're using by Now pay later to avoid interest and the Appearance of more debt in the eyes of The banks because it doesn't show up in Your credit report the Consumer Finance Protection Bureau found that the average Credit card debt across multiple cards For the people using buy now pay later In their survey was 24,6 $79 their credit scores were also Lower in the mid 600s on average versus The people who didn't use buy now pay

Later and they had on average more Delinquent accounts than the average Nonb now payat user so the average user Of by now payat is someone who is in a Poor financial State according to this Report The Wall Street Journal also Interviewed one guy who was using a firm To cover Basic Essentials and he was Very wary of credit cards so he was Actually using a six-month installment Loan program on a firm which is the Worst possible thing here's the example A recent bill at Walmart was roughly $465 and a firm offered him a choice of Free payment plans he chose a six-month Loan with a 36% interest rate that Didn't require a down payment a 36% Interest rate that is higher than any Credit card I can think of except for Maybe First Premiere Bank which is known As a bank that targets people with able Credit scores and rips them off so could It be that the whole 0% for installment Loan program and the fuzzy warm friendly Branding is kind of like a gateway drug And once someone is juggling death and Using these buy now pay later Services CU they're already in a hole and buy now Pay later is the easiest option for them They get taken advantage of many of These companies like airm even now have A card that you can use in stores so you Can take your buy now pay later facility With you everywhere so that's why I see

These Services as a little dangerous the Pay in for thing is only needed if You're already revolving balances on a Credit card or if you couldn't open a Credit card with say a 0% APR Promotional period because your credit Score wasn't good enough it's proven in The Consumer Financial Protection Bureau's report that these people using These services are in significantly Worse Financial shape than people who Don't use them and if you go beyond the Whole pay in for plan with them and take Out longer loans they charge higher Interest rates than even payday loan Lenders who here in New York state are Only allowed to charge up to 25% you Have a firm charging 36% and cl charges Up to Even the federal government but the best Thing to do in my opinion is only use by Now pay later if you are in good Financial standing and there's no risk You could miss a payment or have to String out your loan into a longer term With interest it's The Old catch22 Situation the people who have healthy Finances and could probably afford the Item either paying with cash or paying With a credit card then paying the bill One month later they don't really need The service whereas the people who might Get into Financial trouble by using buy Now pay later are the ones who keep on

The Credit Pros

Using it so stay out of trouble guys and If you can't afford something unless you Use buy now pay later maybe just don't Buy it all right that is the video for Today please don't forget to get a free Month of Max rewards gold with my link Below please subscribe to the channel if You're new and I put that link to the Video I talked about about how credit Card companies charge interest Immediately on every purchase if you Carry a balance it's on screen now and That's a lot of people probably didn't Know about so you may want to check it Out all right guys see you in the next One bye-bye

The Credit Pros
The Credit Pros

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