Gen Z is drowning in debt as buy-now-pay-later services skyrocket: 'They're continuing to bury their heads in the sand and spend'
Gen Z is drowning in debt as buy-now-pay-later services skyrocket: 'They're continuing to bury their heads in the sand and spend'
Internal data shows member credit card balances are up more than 50% for Gen Z and millennial members since March 2022, when the Fed started raising interest rates.
Summary
Gen Z is increasingly relying on “buy now, pay later” (BNPL) services for holiday shopping, with spending projected to rise 11.4% this year, totaling $18.5 billion.
These services appeal to younger consumers with limited credit histories but can lead to overextension, as they lack centralized reporting and encourage overspending.
Experts warn of accumulating fees, particularly when BNPL plans are tied to credit cards.
With inflation and rising credit card debt already burdening Gen Z, consumer advocates caution that these services may worsen financial instability despite their convenience.
When you think there's no future, there's no need to plan for one.
Gen Z knows that they're gonna have bigger problems than debt.
One big recent consequence is it destroys credit short term, like less than a decade.
It's recoverable, but every one counts as a new line of credit, which automatically gets closed about a year after payment.
So unless you also have a lot of zombie credit cards, it's going to keep debt utilization waaaay up, number of accounts waaat up, and keep average age of accounts low.
This snowballs, especially if they ever do but a house. If they day ever comes, they're going to lose alot of money again.
It's like experiencing turbulence on a place so you scream YOLO and start playing Russian roulette.
If the plane goes down, it doesn't matter. If it's normal no big turbulence, then it's just as much an increase in risk as playing on land.
They assume they'll have bigger problems, and they may be right. But it's should still be concerning.
We got a while before kids are unironically bumping this tho
This snowballs, especially if they ever do but a house
They know this will never happen. They're not buying houses. They're renting until they die on an overheated planet that no one wants to do anything about. Where one party rolls coal and the other pretends that the inflation reduction act makes up for the harm caused by the record oil production they brag about.
They know they're fucked, and there's no reason not to take on as much debt that they can't pay back as possible.
Why isn’t this framed as predatory lending?
I'm not sure because it definitely is.
The whole selling point of services like Klarna is they don't show up on your credit checks, meaning you can very easily take on too much debt.
For the same reason that the subprime mortgage crisis wasn't; line go up.
Eat, drink, and be merry, for tomorrow we die.
In this age where you can quickly spend thousands online (or even in person) without having to actually watch any of it disappear, and corporations are hiring psychologists to make their services and platforms as addicting as possible, you're gonna get a lot of this
I see everyone in the comments saying that Gen Z have checked out and are waiting for the end but I really don't think so.
I think it's never been easier to manipulate a person to separate them from their money and things are deliberately designed that way. Big shiny upgrade now buttons, services forcing you onto 7 day free trials for premium plans upon signing up, expensive yearly subscriptions for products that ten years ago would have been unthinkable as anything other than one time purchases, you name it. Capitalists have used the internet to minmax their penny pinching.
to take this a step further, imagine someone who has been exposed to these services designed to be addictive their entire (digital) life, as well as being pushed further into these services by their peers who are equally addicted and the "influencers" they look up to that are paid by these services.
Yep. It's seriously remarkable how deeply these fuckers have sunk their claws into our social fabric. Literally every possible tactic they can employ to suck as much money from as many people as possible, have been employed, consequences be damned no matter how severe. This cannot be allowed to continue
People do tend to learn defenses against the environment in, so Im surprised.
I swear on everything that I've read this article word for word years ago but replace gen z with millenials
Every single Millennial also had those predatory debit card overdraft fees.
Banks would allow them to purchase something even if the checking account had no money and then hits them with like 25$ for every overdraft. Practice only outlawed in 2010.
God It was this feeling of helpless anger when banks would screw you while u are down. Thanks Obama for fixing that.
Oh it was far worse than that...
They would actually change the order of your transactions in order to maximize the number of overdrafts (and each cost $30+).
For example, say you've got $80 in your account. You buy three separate meals over the course of Monday and Tuesday, and you've got $50 left in your account. But now you remember that there is that one thing they NEEDS to be paid for, but it's $75 and you only have $50 on your account.
Well, you have no choice but to make the payment that brings you to -$25, and incur the single overdraft fee. Sucks, but $30 penalty is less than not having Internet for a month or whatever, so you do it.
So to recap: You had $50 left after those 3 meals. You made one single transaction that brought your account into negative, that means one overdraft fee, right?
Nope.
They would literally re-order the transactions, put the largest one first ($75), bringing your balance down to $5, THEN they would process the meals from Monday and Tuesday giving you THREE separate overdraft fees of $30 each.
So now you owe the bank $90 on top of the $25. And that was what the banks sold as, "overdraft protection."
Shit was disgustingly egregious. Obama made it illegal I believe.
We didn't have this new term buy now pay later to the same extent, the millenials version just called credit cards credit cards.
You don’t have an Aaron’s or Rent-a-center in your town? I’m a millennial and half my formative years were spent on a rent-a-center couch and bed. Half my belongings in my first house were rent to own, now that i think of it. I spent a lot more because of interest and scams but i had zero financial literacy then and i needed furniture. Without a credit card your options were/are limited.
PayPal had zero interest payment plans as far back as like 2010. I'm actually a bit surprised it didn't take off sooner.
Basically reddit 10-15 years ago. The doomsday edging gets stale when you realize things are cyclical. Millennials were supposed to implode with debt by now. An economic cycles or two later and that didn't happen. Now it's Gen-Zs turn to be on the brink of doom.
Does it matter. It seems that a lot of them have checked out already as they see the world burning around them.
Hard to blame them.
lol time to write an article vilifying young people who somehow aren’t thriving in our flawless economic system. What self-indulgent idiots they are. Where’s my Pulitzer?
If were going to slip into a period of hyperinflation then taking on tons of consumer debt is just good financial planning.
This is correct, although usually you'd want to go into debt on something like housing but let's be honest, that's not possible. Why not pay an 80 dollar door dash across four payments?
Isn't that only if wages increase alongside inflation
Oh no. If a fistfull of trillion dollar bills will buy you a shot glass of rice that maxed out credit card from the before time is pointless either way.
If $1,000 today is worth $5,000 tomorrow, you want to spend that $1,000 today so that when you pay up you only pay $1,000. Even if inflation hits you, you still only owe $1,000 no matter how much actual value those dollars still hold.
This is really interesting. Layaway purchases in stores used to be popular but went away in the late 90’s. It’s back now as BNPL, with much worse terms.
Layaway purchases in stores used to be popular but went away in the late 90’s. It’s back now as BNPL, with much worse terms.
Lawaway is superior. Laywaway had zero interest charges. Some places charged a flat fee, but you also didn't get your item until the full balance was paid. There's no chance of a lawaway purchase spiraling into a huge expense. The expense is fixed at the time of layaway and never gets higher. Lawaway also builds the ability to delay gratification, which is an important life skill that is sometimes not common.
BNPL has none of that consumer protection.
Correct me if I’m wrong, but wasn’t the key difference in layaway that you didn’t have access to the item until it was paid off? I remember my mom putting holiday gifts on layaway at Walmart. They’d be kept in storage in the back of the store, and would be given over only after they were fully paid off.
Buy now/pay later plans allow the consumer access to the item now, with a payment plan to follow. It’s much more akin to credit than layaway.
Yes. You had the honor of reserving the item from sale by paying more. BNPL is like the boss in its final form. You can have but don’t own it. Maybe it’s more akin to old furniture places with leases.
https://www.retailmenot.com/blog/walmart-layaway.html
Walmart actually just stopped layaway entirely in 2021 for BNPL.
In the UK the Littlewoods catalogue is the one I remember. You'd end up paying well over the RRP with a year or two of monthly payments.
Or those tv rental shops.
Who is teaching them financial literacy in the first place? Because they aren't being taught it in schools. Meanwhile, these predatory companies do everything they can to convince people to use them.
You cannot budget your way out of poverty. "Financial literacy" is just capitalists kicking the can down the road.
It's not, though. Financial literacy includes things like, not spending money you don't have. When you take these predatory loans to get goods, you end up more enslaved to the capitalist system and to those who have money to lend.
Financial literacy is not a cure-all, just like normal literacy doesn't make you understand Shakespeare.
I think it is highly unlikely that all of the Gen Z people getting these loans came out of a life of poverty.
Stuff like this is why the headline Econ stats do not actually reflect reality.
Sure, there's lots of room for critiquing how the media and the investor class focus on stats that are not actually representative of things on the ground for fairly complex mathematical/economic reasons, but that conversation requires people to have a Masters on Econ to understand.
What does not require this is the much simpler: They do not take personal debt levels and credit scores into account.
People say things like 'inflation is going up' 'i cant afford as much as i used to' and ... the main actual reason for this is usually that they're drowning in debt, but are either unaware or don't want to admit it.
This is a country where 54% of adults read and write at below a 6th grade level. Probably a comparable amount can't actually do their own budget.
...
It doesn't matter if your wages go up 2% in a year if you had to spend that year buying groceries on credit to not starve, and those all have 16 to 36% interest rates.
Systemic issues can only be solved with systemic changes.
No amount of shaming individuals will fix systemic debt issues, if this is such a large trend that it effects most of the generation then it can only be fixed with systemic changes.
The narrative that individuals are responsible for widespread debt is propaganda meant to shift blame off of the rich people causing wealth inequality to skyrocket
No clue how you read myself shaming individuals into what I wrote.
I was writing to explain why everyone feels poorer than all the headline Econ numbers say we should feel.
Why all the libs who spent the last year or two telling us 'the economy is fine actually' were just factually wrong, functionally gaslighting everyone.
If anything, I call out the media, media friendly 'economists' and business people for perpetuating bullshit.
Obviously a general explosion in personal debt levels is a general, systemic problem with systemic solutions?
...
I am all for systemic solutions:
Tax the Wealthy / Tax Corporations
Get rid of student loans, do free tuition
Do a total debt jubilee for those below I dunno 200% poverty income threshold
Cap all consumer credit instruments of all kinds at 3x the Fed Rate
Raise the threshold of income for SNAP and LIHEAP and EITC, etc
Implement universal healthcare, outlaw private insurance, lower costs
Raise the minimum wage
Rent control, automatically expunge all eviction records after 1 or 2 years, actually fund building public housing, write a law that says if a house or condo is on market, unsold, you must drop its price by 5% for every 3 months it remains unsold...
Blah blah, tons of things we could theoretically do.
I mean, we've been telling them their entire lives that the planet is doomed, and they have no future... So why the fuck not bring on the debt?
Because rampant over consumption is the reason the planet is doomed.
I'm going to be brutally honest.
- Corporations are shitstains and prey upon people's minds and wants.
- People today are too entitled / greedy.
No. You don't need that phone to survive, solid but low end one will easily carry you next 3-5 years. No, you do not need to go for McD for breakfast - eat a homemade sandwhich. Takes the same amount of time it'd take to get McD served to you.
But today a lot of folk take a lot of shit for granted or worse, needed, and it's pitiful.
Fuck, that also is due to corporate ads and framing. But people need to wake up and stop fueling this shit on their own. And stop blaming schools - this shit is for parents to teach ffs, like the rest of actual household chores.
Also I am not arguing for everyone to live frugally but instead to learn a mindful way of spending. If you actually have free money, money you own and not a credit, then sure, treat yourself.
It's something I don't understand. Writing this on a 5 year old phone that cost me 130 euros back then. I do have the money to buy any reasonable phone on the market (not some vanity ones for rich people to show off, but like the top of the line iPhone or Pixel, whatever).
But why would I when the old one still works and does everything I need? Why would I order food when I can just make something myself? If I want to treat myself, I go to a restaurant that I actually like and spend like 30 euros tops. That's once every one or two months. Why do people overspend on this?
If you have kids and actually struggle with basic goods, that is something completely different. But I get the point you're trying to make - some people just feel entitled to a standard of living that they can't afford, and corporations gladly exploit that. And honestly, they'd be stupid not to. A sucker is born every minute. It's up to the legislative to stop this predatory behavior because the market won't regulate itself in this regard.
And you're right, it's not up to school to teach this - I wanted to comment on this one as well - school is supposed to turn you into a person that can think for yourself and realize that a high interest rate is something to your disadvantage. Not to exactly tell you what to do in situation X should you ever encounter it. Because society and its problems change and then suddenly what you learned no longer applies.
In the end, I can't tell people how to spend their money. But once might make the case that with BNPL, people spend money that's not not actually theirs yet. And once these people need help, is going to be society to foot bills, not the corporations who made money off it.
Systemic issues can only be solved with systemic changes..
No amount of shaming individuals will fix systemic debt issues, if this is such a large trend that it effects most of the generation then it can only be fixed with systemic changes.
The narrative that individuals are responsible for widespread debt is propaganda meant to shift blame off of the rich people causing wealth inequality to skyrocket
There is propaganda and then there is fact that nobody teaches their children about budgeting and financial responsibility. Do not treat credit like money you own, do not allow yourself to perceive luxury items as something you need, be mindful of what you can actually afford. Today people seem to have problems with these ideas - lack of education on the topic and aggressive ad campaigns by corporations resulted in that.
But while we cannot change masses, we not only can, but we should point this out to as many people as we can. Often all you need to notice something is for someone else to ask question about why that happens. And yeah, sure, maybe helping one or two people won't make a dent, and even then these people may already be past saving or simply unable to pick up new habits. But if every mindful person tries to help someone else at least once, shift in society is guaranteed. And such shift will result, maybe, in actual change.
And, on a more flat approach - being aware of your own budgeting limits, spending power and how much money you use is not actually yours tends to radicalize people against the rich.
This widespread propaganda needs to be countered with grassroots encouragement of more practical relationships with money though. That’s the cultural onus for systematic change. Don’t just shame them, but encourage everyone to live more responsibly and to vote for people who will reign in the creditors spreading this propaganda and loaning easy money to every financially irresponsible person
Without grassroots cultural change anyone who reigns this shit in will face political suicide for taking away their easy lines of credit. We see similar things with things like carbon taxation and other incentives to reduce carbon emissions that involve reducing overconsumption by all people (because yes, the average American is part of the problem too). The elites need to lose the most, but all of us need to live a financially and environmentally sustainable lifestyle and the systemic changes we all talk about wanting will impact our lives.
I hate BNPY so much... I deleted my after pay account, which means I can no long use their services unless I get in contact with support to reopen my account. I did it to explicitly make it near impossible for me to be tempted. It worked. There were times I felt regret, but it was 100% the smartest move.
Then, PayPal introduced pay in 4... All my hard work went right down the drain. I can't afford this shit but fuck it's hard when you're clinically depressed.
Services should be required to allow you to opt out of being offered such things. I choose to live a debt minimal lifestyle because of how I was raised, and I don’t want to be tempted. The same goes for online gambling. (And alcohol advertisements, but I do drink).
Is this actually worse than the five figure credit limits gen x had extended to them? Boomers had store layaway, which really seems ideal for holiday shopping, but there's no money to be made with it so of course it's fallen out of style.
five figure credit limits gen x had extended to them
chase gave me a $17K limit before i was even 20 in the 90s. i know more than a few people who would have had that maxed out the next day
So, I'm going to come to their defence a bit here. Most of this is also covered in my comment I made further into the thread.
I don't think previous generations were any less financially literate on average. You've always had those careful with credit and those that didn't seem to care, or didn't understand the ramifications of their decisions.
I grew up in the 80s and 90s and most large stores had their own store credit system with 30%+ APR rates. Plenty of people that were boomers or gen X had those accounts, and would routinely buy more whenever they cleared their credit a little.
You could also get credit cards and each card in terms of spending power would have similar limits to what you have now. And there was no shortage of people that would be sitting on their credit limit all the time. I knew people in the 90s that had no idea how interest worked and would be sitting on their credit limit paying back mostly interest all the time.
I think the difference is the ease with which you can gain access to credit now.
In the 80s and 90s you generally needed to go into the store to get their credit. You needed to go to a bank or fill in paperwork in the post to get credit cards. Crucially here, generally there were less providers of credit. Credit cards were often offered by banks, there were not so many resellers of credit. To gain a line of credit you had no chance to ever repay took more effort and as such wasn't so much of a problem as it is now. It was still a problem, and companies routinely made money from the financially illiterate, even then.
What I think is different now, is that you can get credit from a few screen swipes on your phone now. There's many many more providers of credit too. As such, the ability to get into an irreversible credit position is much easier. I would put money down that the same people with £1000s in various store credit/cards all compounding interest at 30%+ in the 90s, would also be in huge debt if credit were as easy to get then, as it is now.
I am going to blame financial institutions more here (those getting into the mess are not entirely free of blame). There might be over a thousand sources of credit now, but they all funnel up to a handful of large finance institutions, and they're the ones really burying their head in the sand pretending they don't know this is happening and couldn't do anything to stop it. They most certainly could prevent it, if they wanted to. It just works better for them to have a generation that is constantly paying interest on never repayable debt. Even factoring in the few that will be written off.
Yes, ultimately we all have our own responsibility not to get into these situations. But I don't think Gen Z or any generation are or were better at this on average. It's just the conditions that allow it have changed, and continue to change.
they're the ones really burying their head in the sand pretending they don't know this is happening and couldn't do anything to stop it.
"It is difficult to get a man to understand something, when his salary depends on his not understanding it."
If your outlook on life is "work until you die with nothing left over", might as well take back something first. The debt will pile up one way or another.
It's all well and good to blame the generation that can't afford shit to use payday loan companies to buy shit...but when these companies align with the likes of Dominos Pizza to allow you to buy a pizza and pay off in several weekly installments, maybe it's time to blame prices for being ridiculously high?
Pizza is not a necessity and adding predatory marketing doesn't help. The whole point is to extract money from as many as possible including the ones that really cannot afford it.
Pizza is not a neccesity but at the end of the day we can't expect everyone under 30 who doesn't have well off parents to live on beans and rice. People aren't robots and while no individual luxury is a neccesity, luxuries as a whole are a neccesity to some degree.
Predatory debt gonna be predatory
In other news, the interest rate on unsecured pseudo-credit services is very high.
Now over to Dave with the weather.
Yo dawg I heard you like installments:
Recently I noticed my credit card lets me move transactions into installments. So, you can put an installment into installments now. When you go bankrupt you can pay off your debt in installments too.
It's almost like the "services" are designed just for this...
Well when the world is about to end in multiple ways at once, why with about debt?
I thought we did the whole credit crash a century ago.
We had a pandemic, radical credit spending, nazis, the writer is remixing the previous season. Lazy.They’re just waiting for the trickle down
The absolute irony of the paywall
If the outcome is the same whether you save up or not - you'll never be able to afford anything - why now "own" things while you can?
Never pay them anything back!
BNPL is a credit card but in app.
Nah more credit check hits
No, bnpl do soft pull, so that credit check doesn't hit your credit score (unless you default on bnpl)
Keep on buying plastic shit, I’m sure it’s gonna be fucken great.
You can actually survive without streaming services and online subscriptions.
Is this today's avocado toast?
It's today's variant of "beans and rice cost, x. So why are you complaining about food cost?"
Man imagine the privilege of worrying about not having streaming services as an essential need.
genZ is the least empathic gen i have seen yet. gives me hope future generations can learn from that.ql
I mean, you get out what you put in. Is it a surprise that a generation that's growing up in a predatory world without empathy lacks empathy?
you think previous times were LESS predatory? like when? back then rape was legal, war was just over, alcoholism ....dude, how is it worse?
no. it is always the people themselves. maybe plastic retarded them? i mean swifties dont even allow a discussion on taylors remarks with kanye west. an entire fan generation ignores that she is the culprit.
