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As 'buy now, pay later' surges, a third of U.S. users fall behind on payments


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There must be good money to be made with these services. At Sephora, they have stopped posting prices in the store and they have ads for a BNPL service everywhere. I also went to buy some Levi’s recently and they were offering a 25% discount if I signed up for Afterpay. It is being pushed super hard. As a credit card user, there’s not much incentive for me to use such services. I guess it’s a way for them to sell overpriced goods to younger buyers with no credit.

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Mrs. Vig wants to add another dresser. I dread having to deal with with the sales weasels that want to push financing for everything. Not to mention, we own a pickup truck, so their over priced delivery services won't be needed either.

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The Jeans still appear available for $30-$40:

https://www.levi.com/US/en_US/sale/mens-sale/c/levi_clothing_men_sale_us/facets/productitemtype/jeans

 

This article still holds true despite the recent inflation:

https://carvedinblue.tencel.com/stefano-aldighieri-denim-price/

 

But yeah people certainly buy what they cant afford and always have.  It may be different if financial literacy was taught as a 9th grade class and then people were expected to work for 2 hrs a day in HS as part of the curriculum. They could get graded on their work.  

Edited by Wander907
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You missed the pesky little word "sale". Now that the sale is over, they are now at $50 to $60 again.

It's simple third-grade concepts like "There's no such thing as a free lunch" that gets people into trouble.


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This article still holds true despite the recent inflation:

https://carvedinblue.tencel.com/stefano-aldighieri-denim-price/

 

The author of the article is a Neanderthal.

 

First of all, even if his price quotes were accurate, comparing car prices to the price of jeans indicates severe, irreversible brain damage. Precisely how many cars sold on the American market are manufactured entirely in Guatemala, Honduras or Indonesia where the average wage is around $1 per hour with a minimum of 48-hour work week?

 

Jeans are not houses or cars and price-comparing them is really stupid.

 

 

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I will play devils advocate for a bit as the post was entertaining (mostly due to the Neanderthal and irreversible brain damage points, afterall whos to say how many Neanderthals with irreversible brain damage are left in this pandemic ravaged world before they all go extinct).

 

So the common trait the author of that article (for better or worse) was pointing out was they are common points of inflation.  They are both considered in CPI for example: APPAREL (men's shirts and sweaters, women's dresses, jewelry); TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance);

 

It is true for most people one is a capitol good and the other not but on average both depreciate over time, in the USA both are necessity's for a large portion of the working population, both are driven up by inflation.  For the most part in the USA neither are Veblen goods (boutique jeans and Ferrari's not withstanding)

 

 

As for the sale part, pretty much everything goes on sale monthly at Levi's.  In fact the sale portion is a permanent part of the site, I can not recall a time that there were not sales... again like the auto industry pre covid era (chip shortage not withstanding).

 

As far as houses go, the recent covid era housing boom has also driven prices up tremendously.  The jeans really dont seem to be outpacing them, although it may indeed be many of the same consumers getting new mortgages as fast as possible who are running into retail stores.  I agree though, a house retains value much better then jeans with a few collectable exceptions making it a poor example.  Which is why houses are not part of CPI... but rent is.  

 

I do agree with you on the buy now pay later point you were making however.  

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I will play devils advocate for a bit as the post was entertaining (mostly due to the Neanderthal and irreversible brain damage points, afterall whos to say how many Neanderthals with irreversible brain damage are left in this pandemic ravaged world before they all go extinct).
 
So the common trait the author of that article (for better or worse) was pointing out was they are common points of inflation.  They are both considered in CPI for example: APPAREL (men's shirts and sweaters, women's dresses, jewelry); TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance);
 
It is true for most people one is a capitol good and the other not but on average both depreciate over time, in the USA both are necessity's for a large portion of the working population, both are driven up by inflation.  For the most part in the USA neither are Veblen goods (boutique jeans and Ferrari's not withstanding)
 
 
As for the sale part, pretty much everything goes on sale monthly at Levi's.  In fact the sale portion is a permanent part of the site, I can not recall a time that there were not sales... again like the auto industry pre covid era (chip shortage not withstanding).
 
As far as houses go, the recent covid era housing boom has also driven prices up tremendously.  The jeans really dont seem to be outpacing them, although it may indeed be many of the same consumers getting new mortgages as fast as possible who are running into retail stores.  I agree though, a house retains value much better then jeans with a few collectable exceptions making it a poor example.  Which is why houses are not part of CPI... but rent is.  
 
I do agree with you on the buy now pay later point you were making however.  

I like your analysis.

I'm not sure why people like the BNPL thing. It seems to be really popular these days and merchants push it constantly. Maybe it's the no credit check thing? I'm not sure.

But no matter what, there's no free lunch. If merchants lose money when a portion of the BNPL people default, in the long run they are still earning money.


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10 hours ago, PotO said:


I like your analysis.

I'm not sure why people like the BNPL thing. It seems to be really popular these days and merchants push it constantly. Maybe it's the no credit check thing? I'm not sure.

But no matter what, there's no free lunch. If merchants lose money when a portion of the BNPL people default, in the long run they are still earning money.


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Yes, is it really people so on the financial edge that they need a payment plan to buy a sweater? Or is it just people who say, ok, if it's free, why not stretch out a few payments?

 

(Full disclosure: I have make a few purchases (less than $100 each) using Afterpay, Klarna,  and Quadpay (now Zip!) - certainly not because I needed to, but just to try them out for fun. Now they bombard me with promotional emails to buy more. When people are one and done with them,  where is the business model?)

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7 hours ago, racer7949 said:

 

Yes, is it really people so on the financial edge that they need a payment plan to buy a sweater? Or is it just people who say, ok, if it's free, why not stretch out a few payments?

 

(Full disclosure: I have make a few purchases (less than $100 each) using Afterpay, Klarna,  and Quadpay (now Zip!) - certainly not because I needed to, but just to try them out for fun. Now they bombard me with promotional emails to buy more. When people are one and done with them,  where is the business model?)


I suspect most users of BNPL are not one and done. The business model is like that of the corner crack dealer. First use is a free sample of sorts, after that the idea is to get their claws into you. 
 

No different than those that can’t control their impulses when a using a traditional credit card. 

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Yes, is it really people so on the financial edge that they need a payment plan to buy a sweater? Or is it just people who say, ok, if it's free, why not stretch out a few payments?
 
(Full disclosure: I have make a few purchases (less than $100 each) using Afterpay, Klarna,  and Quadpay (now Zip!) - certainly not because I needed to, but just to try them out for fun. Now they bombard me with promotional emails to buy more. When people are one and done with them,  where is the business model?)

In theory, stretching out the purchase price of an item makes sense.

But in practice, it strikes me as really dumb. Sure, your experimentation is understandable and I would never call that dumb. The problem is when people do that for other reasons.

First of all, you lose out on 2% cash rewards, if not more. AmEx just gave me a 0% offer for another year on my 2% cash rewards card so not only do I get the 2% rebate, I can carry that balance at 0%. Citi and HSBC also recently offered me 0%. That's a lot better than BNPL.

Another big advantage is that when I use my credit card I have chargeback rights. With BNPL you could end up getting screwed.

Finally, there's the pesky little issue of paying far more than you should on a BNPL item than you should. Levi's had a BNPL offer on jeans at $59.99 a pair. Normal price is $39.99. So, not only do you lose rewards and chargeback rights, you get screwed for an extra $20.

I think BNPL is designed for a target audience of idiots and / or people on food stamps.


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I suspect most users of BNPL are not one and done. The business model is like that of the corner crack dealer. First use is a free sample of sorts, after that the idea is to get their claws into you. 
 
No different than those that can’t control their impulses when a using a traditional credit card. 

Precisely!


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13 hours ago, PotO said:


In theory, stretching out the purchase price of an item makes sense.

But in practice, it strikes me as really dumb. Sure, your experimentation is understandable and I would never call that dumb. The problem is when people do that for other reasons.

First of all, you lose out on 2% cash rewards, if not more. AmEx just gave me a 0% offer for another year on my 2% cash rewards card so not only do I get the 2% rebate, I can carry that balance at 0%. Citi and HSBC also recently offered me 0%. That's a lot better than BNPL.

Another big advantage is that when I use my credit card I have chargeback rights. With BNPL you could end up getting screwed.

Finally, there's the pesky little issue of paying far more than you should on a BNPL item than you should. Levi's had a BNPL offer on jeans at $59.99 a pair. Normal price is $39.99. So, not only do you lose rewards and chargeback rights, you get screwed for an extra $20.

I think BNPL is designed for a target audience of idiots and / or people on food stamps.


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Yeah, this is basically the next iteration of store cards, IMO. Easy to obtain, high interest, and used to buy overpriced stuff. The "soft power" of this kind of credit is that it convinces people to shop at certain stores and pay more because they think it is the only way they can "afford" to buy a certain product. It's targeted to poorly informed impulse buyers.

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15 hours ago, PotO said:

...paying far more than you should on a BNPL item than you should. Levi's had a BNPL offer on jeans at $59.99 a pair. Normal price is $39.99.

 

Oh, OK, I didn't know that was happening. I only encountered them on merchant sites where there was one price for the item - the BNPL option wasn't offered until checkout where I would have otherwise used a credit card.

 

BTW, I used my credit card for all my BNPL payments, so I got my rewards. But I can see how chargebacks, etc., could get complicated. Also, I wonder who pays the merchant fees and if they are inflated by going through the BNPL (on items that aren't already inflated in price as in the Levi's example).

 

Anyway, experiment over. I don't plan on using them again.

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22 hours ago, PotO said:


Finally, there's the pesky little issue of paying far more than you should on a BNPL item than you should. Levi's had a BNPL offer on jeans at $59.99 a pair. Normal price is $39.99. So, not only do you lose rewards and chargeback rights, you get screwed for an extra $20.
 

 

10 hours ago, racer7949 said:

 

Oh, OK, I didn't know that was happening.

 

Wow I agree I thought it was the same price too, yeah if they are selling same product, same time, but one with 50% markup for BNPL that is really predatory.  It makes me wonder other stuff.  Can teenagers do BNPL?  Seems way more vicious then I thought.  50% is worse then a pay day loan.

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Wow I agree I thought it was the same price too, yeah if they are selling same product, same time, but one with 50% markup for BNPL that is really predatory.  It makes me wonder other stuff.  Can teenagers do BNPL?  Seems way more vicious then I thought.  50% is worse then a pay day loan.

I have seen two forms of BNPL. One was where you use your credit card and they charge that card the predetermined price on the predetermined dates. Another is where the merchant handles the financing directly.

In either case, even if the price for a one-time payment is the same as the BNPL price, the merchant has increased costs. They lose capital flow for a certain amount of time, there's increased risk of not getting paid, the expense of the BNPL process and probably others. So who pays these extra expenses? You do.

Yes, you do. Whether you use BNPL or not, these costs are included in the price of the goods. So, when 1/3 of BNPL users stiff the merchant, you are subsidizing them. Cute, eh?

So now, you (actually we) are subsidizing food stamps, BNPL and credit card processing fees. The food stamps I don't mind so much because there is a chance, albeit small, that we are helping people who actually in need due to unfortunate circumstances. But I do mind paying for some turd to finance a pair of $150 Levi's with holes all over them for a year.

Now as it relates to credit card swipe fees, I don't mind that either because I actually profit on that deal. But those that customarily pay cash should be *Admin and our Terms of Service prohibit profanity*ing about them. Merchants should be offering discounts for cash, but that will never happen because it makes it more difficult for merchants to scam people.


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22 hours ago, PotO said:

Finally, there's the pesky little issue of paying far more than you should on a BNPL item than you should. Levi's had a BNPL offer on jeans at $59.99 a pair. Normal price is $39.99. So, not only do you lose rewards and chargeback rights, you get screwed for an extra $20.

I think BNPL is designed for a target audience of idiots and / or people on food stamps.

 

I respect you as a straight shooter who almost always has their story straight, but this anecdote (when trotted out and suggested to be a typical situation) smells more than a little.

 

What represents "normal price" here?  Since both items should qualify for BNPL financing (specifically "afterpay") if the levi.com website does feature the same item in two separate listings it has nothing to do with the BNPL offering. 

 

You're, of course, welcome to your opinion re BNPL financing.  Speaking to some general critique in this thread, I'd lump the option in with typical single store retail cards ("R&B" made a similar observation early on).  And, in no respect do I view the financing as "predatory" (the the type of lending favored by the idiot and/or food stamp crowd).  However, as with any type of "convenient" credit, it's very vulnerable to misuse by those who can't afford the financial commitment they enter into.  This doesn't de-legitimatize the credit product, but it does mean that if the product proprietors haven't properly factored that risk, they'll take a beating on the product.

 

I imagine that BNPL is marketed to retailers as an option by which they can economically offer a "store card" equivalent financing vehicle to their customers.  However, the delinquency rates being reported (at a time when most credit products are seeing reduced delinquencies) suggests that the premium charged to retailers may be hiked considerably.  One fallout may be that retailers hike purchase minimums for financing participation, where credit availability is more easily rationalized as an avenue to higher sales volume.  And/or qualification standards may rise about the "warm body" threshold that seems to rule now.

 

 

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I respect you as a straight shooter who almost always has their story straight, but this anecdote (when trotted out and suggested to be a typical situation) smells more than a little.
 
What represents "normal price" here?  Since both items should qualify for BNPL financing (specifically "afterpay") if the levi.com website does feature the same item in two separate listings it has nothing to do with the BNPL offering. 
 
You're, of course, welcome to your opinion re BNPL financing.  Speaking to some general critique in this thread, I'd lump the option in with typical single store retail cards ("R&B" made a similar observation early on).  And, in no respect do I view the financing as "predatory" (the the type of lending favored by the idiot and/or food stamp crowd).  However, as with any type of "convenient" credit, it's very vulnerable to misuse by those who can't afford the financial commitment they enter into.  This doesn't de-legitimatize the credit product, but it does mean that if the product proprietors haven't properly factored that risk, they'll take a beating on the product.
 
I imagine that BNPL is marketed to retailers as an option by which they can economically offer a "store card" equivalent financing vehicle to their customers.  However, the delinquency rates being reported (at a time when most credit products are seeing reduced delinquencies) suggests that the premium charged to retailers may be hiked considerably.  One fallout may be that retailers hike purchase minimums for financing participation, where credit availability is more easily rationalized as an avenue to higher sales volume.  And/or qualification standards may rise about the "warm body" threshold that seems to rule now.
 
 


Obviously you have no idea about how this works.

Levi's uses Afterpay. A normal pair of 505s is often on sale for $39.99, without the Afterpay option. When the Afterpay often is available at checkout, the price is $59.99 with a $10 discount. Now, a refresher for third-grade math: $49.99 is $10 more expensive that $39.99.

Equating Afterpay with a retail store credit card shows that, in addition to third-grade math, a serious deficiency in understanding the basics of credit and third-grade logic. Let's look at store credit first. Typical in that area would be any of the cards issued by Comenity or Stinkrony. Both of them do a credit check and decline people left and right.

Now let's look at Afterpay. I just completed three experiments with AfterPay. My wife signed up and even without entering her SSN and using an address that doesn't appear on her credit reports, she got an instant approval for $600 without an inquiry.

I also applied and also without SS and using an address never on any of my credit reports, an instant $600. The cute thing here is that all my credit bureau reports are frozen. I also logged into each of my three credit monitoring services and there wasn't even a soft inquiry.

Then I had my youngest son apply. He's 15. Using a very old address and, again, with no SSN and a slight error in DOB, instantly approved for $1,000.

So your theory that Afterpay is similar in any way to retail store credit cards is pure b.s. Afterpay is a fooking accident just waiting for a place to happen. And that is why they have a 33% default rate.

Now let's go back a bit to third-grade math and logic. It is impossible that those losses are not factored into the cost of the merchandise. That explains, also, why Levi's doesn't push Afterpay when they sell their jeans for the "sale" price of $39.99. Funny, too, how Levi's disappears the Afterpay option when I go into checkout using my 15% military discount that they offer.

So, if you believe that someone willing to pay $16 more for the same pair of jeans just because they can pay it off at $10 a month isn't an idiot or on food stamps, it may be because you are on the same boat as they are.


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5 hours ago, PotO said:

Levi's uses Afterpay. A normal pair of 505s is often on sale for $39.99, without the Afterpay option. When the Afterpay often is available at checkout, the price is $59.99 with a $10 discount. Now, a refresher for third-grade math: $49.99 is $10 more expensive that $39.99.

 

God you're unusually thick today (sure you're dosing your meds correctly?)

 

Every purchase on levi.com is eligible for Afterpay financing, provided that your TOTAL purchase exceeds $35.  So, the fact that those jeans are on sale or not has no bearing, in itself, on whether you can finance with Afterpay (as long as your cart totals $35+).  Next time your jeans go on sale, if the price is under $35, maybe you want to double up your purchase, or consider pairing them with a snazzy shirt, so you can take advantage of Afterpay.  Or maybe not.

 

You may have aced math in 3rd grade, but you apparently flunked out of art class when it came to perspective.

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