54% of Gen Z Shoppers Use Pay Later Plans to Buy Groceries
54% of Gen Z Shoppers Use Pay Later Plans to Buy Groceries
PYMNTS Intelligence found that consumers increasingly see deferred payment plans as a budgeting tool, but vary in how they use it.
"Pay later plans"? Other than credit cards, WTF are you talking about?
Yeah, I have a credit card that pays me back 5% cash on grocery store purchases. It would be stupid NOT to use it, then I pay the card off every pay day.
Groceries + free money.
They’re talking about installment plans through your credit card. You pay a fee to split a charge into monthly installments, usually of your choosing. By paying the monthly installment and the rest of your balance from other charges, you can avoid interest kicking in, even while you owe the full amount. The fee is usually a % of the purchase, like 3% or 1% per month or something.
It can make sense on a large one-time purchase, but it’s weird to do it for frequent purchases like groceries.
They could also be talking about Affirm/Klarna/Afterpay. I've seen those advertised as being able to use them that way.
Edit: looking back, that might be the most awkward sentence I've ever written. I shouldn't get on here while I'm drinking.
I can choose with my credit card to designate a purchase over 100 bucks as a pay over time purchase. I don't use it for anything less than 4 digits, but this year we got hammered by 4 4-digit car repairs, a 4-digit tree removal, two surgeries for our dog, and a few other unexpected big expenses. I used it for the car repairs and the dog surgeries because there was a promotion where there was no fee, it just raises the minimum monthly payment, and brought the interest down. I didn't have the cash to pay that many things off at once so I'm using to to pay them down that way at a lower rate.
But you are absolutely right, using pay later plans for small frequent purchases is not great. They might not have a choice though.
I don't think this article is about you
As someone who trashed my credit the moment I turned 18, this whole article is bizarre to me. I'm in my 30s now and I still have to pay for (nearly) everything, up front, in full (even cars). I can only use private landlords because no apartment community will approve me. If I can't afford something, I can't buy it. Amazon is the only entity that trusts me with a payment plan, because they're the only ones who don't check your credit score. As long as you pay on time, they don't care; so I always have. That's the only reason why I could afford a TV.
Yeah, I have a credit card that pays me back 5% cash on grocery store purchases. It would be stupid NOT to use it
Groceries + free money.
I'm reading this as a European and have questions... We all know that there is non free money. So, what's the business model? Making you use the card more by giving you "free" money and making the shops pay more to use the payment service, so that the shops then increase the prices, so that you pay the same as before (considering increased prices and cashback), but are now using the payment system a lot more?
Few tricks.
- Card services actually get a small fee per transaction from the retailer so they just get paid every time you use their card which can add up.
- If you fail to pay off the balance for any reason they can charge generally a 20%+ compounding interest that for most people is probably closer to 27-30% and quickly replaces the minimal cash back.
- Spending habits and ability to sell the data to other card/loan providers and advertisers can help generate additional revenue. Think maybe you consider them trustworthy and they offer a car loan for $30,000 and you take it happily without looking around to find out they have a much higher interest rate on it and they get an extra couple grand from you.
making the shops pay more to use the payment service, so that the shops then increase the prices, so that you pay the same as before
Just nitpicking because I enjoy these thoughts:
When the shop increases prices, it has to do it for all the customers, including the ones without credit card. So a part of the cost is offloaded to other types of customers. While credit card customers should see a slight increase in price, it should not be as much as they saved previously. So still a net win for them, at the cost of others.
As others pointed out, the real scheme is probably entirely different.
Interest rates if you don't pay off the full amount
Credit card companies make money off selling your spending habits to information brokers.
The business model is depending on card users accumulating interest. So they give you perks to get you to use the card and enough people won't pay it off every month that they'll make all their money back and more.
Klarna etc. It's like a credit card but for people who aren't allowed credit cards, and it doesn't show up on your credit reports.
Which is a terrible idea. Lending limits are so you don't get in over your head, they're not some scam to keep poor people poor. Poor people are already poor. Corporations would cheerfully lend to you until you can pay no more, and then sell you for parts.
Klarna does appear on credit reports, at least here in Australia.
There's two forms.
-
Some banks offer to split payments on debit purchases after you make the purchase.
-
Some stores (mostly online) offer it at checkout.
There's no credit checks, and it's easy for the buyer to not realize what's happening.
Every single time you do it, a 3rd party company opens a line of credit for it.
It's like getting a new credit card every time it's used. Which demolishes peoples credit before they realize what's going on.
But there's rarely interest if paid on time, so people just don't understand the damage they're doing.
-
Imagine using Sezzle for groceries. I doubt they are doing it out of necessity and probably out of just ease of use imo.
I had to deal with food insecurity when I was a young adult. This was around the turn of century. More than once I wrote checks I could not cover, hoping to get cash in the bank before it cleared. And I had to eat overdraft fees I obviously couldn't afford as a result.
This isn't so different in that not having enough money ends up costing more. And with wage disparity and food costs being what they are now, it's easy to believe that percentage, unfortunately.
Side note: man I'm super old :(
"Turn of the century" and immediately think of 1900... And I'm like oh wait 2000 is a turn of the century.
I see this so much from my coworkers. I could never. I'd rather do without or just steal if I really need something. Credit like that is a trap. I learned that from growing up poor. I'm 36 and debt free and I'm not going back. I'm not buying every day things on credit. I can wait a few paychecks if I need to.
I’d rather do without or just steal if I really need something.
Think of Pay Later as stealing on lay-away.
90% of everyone else does too. **With credit cards. **
I mean responsible card owners pay their statement in full every month. It's a great way to get purchase protection and cash back or reward miles. This is more like splitting payments over multiple months, and if you do that with a credit card APR you're getting a terrible bargain.
I just got a credit card to build credit. I've never had a loan or card prior to this. The whole thing is so gross.
I hate to get biblical but I'm reminded of the story Jesus fucking up those finance bros with a rake. Shit stays the same apparently. 2k years on and it's the same shit. I'm not religious AT ALL but if Jesus did come back and immediately started beating wall Street bros about the head and face with landscaping tools...
I was told to carry a small balance to improve my credit and it works.
*Claim it's a myth but I saw an improvement from paying off my balance every month. My broker told me to do it in advance of applying for a mortgage, I did try to fact check him but couldn't find anything definitive one way or the other. When it came down to it though, my score improved by changing literally only that.
Most people aren't reasonable card owners lol
Very normal to have more expenses in a month than you have in income. And if you don't have savings (because you're already living on the razor's edge) then you need to assume debt.
You can definitely argue all sorts of mistakes people make in financializing that debt rather than eating it in other ways (lower quality of life, deferred maintenance, gig work as secondary income). But you'll need to ignore the core reality of personal income being divorced from cost of living. Rents, utilities, car/education debt, and health care costs are consistently the highest budget items on any given person's balance sheet. And so long as those costs continue to outgrow wages, you're going to see more and more people falling into the debt trap over time.
There is no individual solution to a systemic problem, save escaping the system entirely. "I know a guy who fucked up..." anecdotes are - in my experience - far more often stories about kids from rich families who can absorb the debt or skate it using bankruptcy. The "I know a guy who played a perfect hand and is still totally fucked..." anecdotes are far less common to hear about but far more common in practice.
One issue is that credit card spending is tracked as consumer debt, but these schemes largely aren't, so the rosy economic picture that has been painted by official numbers could be undermined by these hidden numbers.
I use my credit cards for points only. I budget exactly how much to spend on the credit cards and pay it off every month. Then I hop around different credit card companies to rack up more points.
Still borrowing money, but they ain't making a dime off me.
They make money every time you use it. Not a lot, but it's more than a dime.
Betting on the collapse of civilization… I get it.
Haha… If the us collapses by next Friday, I got my groceries half off.
Oh fuck.
Why pay now when I don't even know if I'll still be alive next week?
How tall is that shopping cart or how short is that lady?
I believe she is crouched judging by the way she's holding that jar