Buy now, pay later: what could possibly go wrong?
Lesson summary
Hi there everyone, it’s Jeff and this is Plain English, where we help you upgrade your English with current events and trending topics. You know how you can stuff a little spinach in a fruit smoothie? You trick yourself into getting the nutrients without having to taste the spinach. That’s what it’s like here. You get so distracted by the topics that you don’t realize you’re actually learning new words the whole time. That’s how it works.
Anyway, today’s lesson is number 472 and that means JR, the producer, has uploaded the full content to PlainEnglish.com/472.
Today’s topic is about the dangers of buy now, pay later. You first heard about that in last Thursday’s lesson, number 471. So if you haven’t listened to that one yet, go ahead and listen at PlainEnglish.com/471. In the second half of today’s lesson, you’ll learn how to use the phrase “egg on,” and—spoiler alert—it doesn’t have anything to do with eggs.
Gen Z and Buy Now, Pay Later
Last Thursday, I introduced you to America’s new favorite way to pay for online goods. It’s called “buy now, pay later .” Here in the U.S., it’s hard to avoid seeing this option at the checkout page of our favorite online stores. This option lets us pay for our purchases in installments; instead of paying the full cost up front, we can pay in, say , four monthly or biweekly payments.
Buy now, pay later is not exactly a new concept: it’s the same idea as a credit card, a mortgage loan, a student loan, or a car loan. It lets you receive something of value today and pay for it over time out of your future earnings.
Just like taking on any other type of debt, this can make sense if you want a large purchase today and you are reasonably certain you’ll have the ability to make the payments later. As you learned last week, consumers like these payment terms because they’re more accessible and they have a beginning and an end and, crucially, they don’t require interest payments.
These payment plans started to become popular about two years ago; they were popular with Peloton exercise bikes. Consumers weren’t paying for gym memberships, so they could afford to pay for an expensive exercise bike over a few months. It was popular to use buy now, pay later with bulky furniture, too. Then, as travel opened up, you started to see “buy now, pay later” with flights.
But now, people are using buy now, pay later to buy household goods, like cleaning supplies or even groceries. Browser extensions and apps let you buy now and pay later even at online shops that don’t offer the option at checkout.
Buy now, pay later can be a good deal if you make the payments on time. But if you don’t make the payments on time, it’s another story. Miss a payment, and all of a sudden you owe interest on the loan and you’ll have to pay additional fees. And many are reporting missed payments to credit reporting bureaus; those missed payments will affect a consumer’s ability to get a mortgage loan down the line .
The buy now, pay later companies market themselves as a friendly, modern alternative to credit cards. But consumers that miss a payment will find that their loans are forwarded to collection agencies; these agencies are not friendly and modern. They are old-fashioned debt collectors.
It won’t surprise you that the youngest generation of consumers is the one in the most trouble, egged on by influencers who make a commission off their followers’ purchases.
TikTok users might recognize a popular type of video: an influencer opening up box after box of clothing, jewelry and accessories, screaming in delight at every new item. Some promote entire “wardrobe revamps,” encouraging followers to literally replace all of their clothes.
The influencers often get those clothes for free, but their viewers imitate them, buying now and paying later for clothing, makeup, jewelry and perfume. One survey found that 73 percent of Generation Z’s buy now, pay later spending is on fashion. The influencers get commissions or direct payments from brands; the followers get a brand-new type of debt.
One survey found that 70 percent of customers spent more than they would have spent if they had to pay the full price upfront. And 42 percent of consumers have missed a payment. Another survey found that 30 percent of Gen Z shoppers have missed two payments.
But you might be asking, Is this worse than regular credit card debt? I don’t think it’s worse, but it has a different set of dangers. The first is the marketing. Buy now, pay later is heavily marketed toward people who don’t qualify for credit cards. This can be good by extending credit to people who need it for big purchases. But these are also the people who can least afford it or who are least able to manage it.
Another concern is that consumers believe these loans make their purchases cheaper. This is hard for me to believe, but a lot of shoppers freely admit that they feel their purchases are cheaper when they pay in installments. They also don’t think that these loans are debt. In fact, a spokesman for Afterpay said these installment payments were a way for consumers to pay over time—his exact words—”without having to go into debt.” Of course, “buy now, pay later” is the definition of going into debt.
The final concern is that this form of loan has not yet survived a recession. You can complain all you like about banks and their rules, but they spend a lot of time studying how their loans would be affected by a recession, based on what happened in previous recessions.
Buy now, pay later firms have no track records to study, and the “move fast and break things” ethos of Silicon Valley startups doesn’t give me much comfort that they’re being responsible when they extend credit.
Influencers and the influenced
I’ll never forget the first time I heard the word “influencer.” I was walking down the street with a friend and he pointed out another person sitting at a table at an outdoor café. And my friend said, “That’s a really popular influencer.” And I did a double-take: “influencer” was not a popular word before social media. It took me a second to realize what it even meant.
And I thought, if you follow him, and you read what he writes, and you openly call him an “influencer,” then what does that make you? That makes you the “influenced.” And to this day I continue to marvel at the term, how freely people use the word “influencer,” it’s like they’re openly admitting that they’re being manipulated! The word just makes me laugh; I can’t help it.
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