The trouble with ‘buy-now-pay-later’ plans like Apple’s

From Brian X. Chen’s “Should You Buy Now, Pay Later? Tread Carefully.” in Thursday’s New York Times:

[A] friction-free option to pay off items in chunks — called “buy now, pay later” — was popularized by Afterpay, a financial tech firm based in Australia and founded in 2014. Throughout the pandemic, as people hunkered down at home and sought to fill voids with material possessions, installment payment plans gained traction. Afterpay, which Square acquired for $29 billion in 2020, spawned copycats, including Affirm, Klarna and Fingerhut. This month, Apple announced that it would offer a similar program.

While the financing programs offer upsides like interest-free payments, there are potential dangers. The rule of thumb for financial security is to be aware of your budget and in control of your spending, personal finance experts said. But buy now, pay later programs seem intended to make people perceive a product to be cheaper than it truly is and lose control of their spending, critics said.

In December, the Consumer Financial Protection Bureau opened an inquiry into these programs, expressing concern that people could accumulate debt with multiple purchases.

“They can be helpful to consumers in the sense that they don’t carry interest if paid on time, but consumers can end up buying more than they planned,” said Laura Udis, a program manager at the bureau.

My take: This is one of the quirks of the news business. A problem that has been festering for some time becomes news when Apple enters the picture.


  1. Jerry Doyle said:
    BNPL plans target individuals who lack the means today to consummate the purchase. They don’t have the money. Therein lies the potential problem.

    If the individual lacks the financial means today then what guarantee exists the individual gains the means later once they walk out the door with the merchandise? Most folk who use BNPL plans already are financially stressed, up to their eye-balls in debt.

    I stopped extending credit when I ran my business because of the high financial risks involved. I decided if the individual lacked a satisfactory credit score to hold a credit card, a debit card, or carry sufficient cash that I need not act as a bank extending credit.

    The problem with BNPL plans is individuals using the plan most likely already are over extended on credit through other sources and can’t take on more debt today. So, they pursue the BNPL installment route of adding even more debt making the situation intolerable for some of them. Along comes a financial recession, some type of negative financial or family event and these individuals can’t make the payback. We now are beginning to see this unfold with “Affirm” whose CEO yesterday was grilled about the rising delinquencies his company is facing.

    BNPL installment plans add more debt for many consumers who should not be taking on more financial risks in the absence of having the financial means today to consummate the transaction through credit at the point-of-sale. I suspect Apple has done a thorough job through credit checks and algorithms to decide who can participate in the company’s BNPL plan. Still, Apple’s algorithms and credit checks cannot discern unexpected negative personal, family and job events.

    June 23, 2022
  2. Romeo A Esparrago Jr said:
    In my day, my late 20’s in the early 90’s in Colorado Springs, it was credit card control. I had accrued $5k in 4 months (a shocking lot for me back then) mostly due to bars & restaurants & entertainment. I cut the card up & paid it off in 3 months of disciplined cash only spending and tracking receipts on Lotus123. Sigh.
    Sometimes, you don’t realize you’re in trouble until you’re in trouble. And the only way to learn those hard lessons is to make those mistakes & survive it.

    June 23, 2022
  3. Fred Stein said:
    BNPL has been around in one form or another for centuries.

    Tim Cook stated clearly that he wants Apple’s fintech to help people improve the way they manage money, not get them in trouble.

    Back to Philip’s point: If only the NYT (they’re not alone on this) listened to what Apple says… Instead they pick a shallow narrative and use Apple as click bait.

    June 23, 2022
    • John Konopka said:
      Exactly, this is hardly new. For decades and decades I’ve seen the ads “90 days same as cash”. Six months same as cash. Etc. Car companies, window companies, home improvement, furniture stores. The list is endless.

      June 23, 2022

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