Working people face deepening blows from the worldwide capitalist crisis, with persistent high prices for basic necessities, from groceries to electricity, rents, child care, health care and more. Many are looking for ways to avoid going under as they struggle to meet expenses, including turning to pernicious “buy now, pay later” schemes that just sink them even deeper into debt.
The capitalists getting rich off these schemes claim their kick-the-can-down-the-road operation is a user-friendly alternative to turning to credit cards, because, they falsely claim, you don’t have to worry about being charged interest.
These “BNPL” loan payment plans are everywhere. Many purchases on Amazon offer them to entice you to buy more. They sound great — you get the items you want with a minimal first payment, the rest stretched out into the future. But the outstanding payments then come due, sometimes for years. And if you fall behind, you get hit with late fees and interest rates up to 36%.
Five major companies in the U.S. offer these plans — Affirm, Klarna, Afterpay, Zip and Sezzle — accounting for over 95% of the market. In addition to Amazon, their operations are promoted by some of the largest retail companies, including Walmart and Macy’s, that see windfall profits from increasing sales of things workers can’t afford, but are enticed to buy.
In many cases the BNPL companies make it almost impossible to cancel orders you realize will end up costing too much, or to get a refund for returning them. As debts mount, these shifty loan sharks turn delinquent accounts over to collection agencies.
The “buy now, pay later” scheme was introduced in the U.S. in 2019, and its use has skyrocketed since then. It rose from a $2 billion industry its first year to $120 billion four years later, as workers battered by inflation got sucked in. Over 86.5 million people used BNPL last year, up 75% from 2021.
But, as the profit-hungry schemers hoped, more than 40% of “buy now, pay later” users made late payments in the past year, leading to interest charges. To try and get out from under, many “also engage in ‘loan stacking’ by taking out multiple BNPL loans,” Marketplace reports. This makes paying the bills take even longer, often resulting in late-fee charges.
‘A vortex of debt’
“‘Buy Now, Pay Later’ has built a delirious new culture of consumption — and trapped users in a vortex of debt,” the New York Times magazine said Oct. 7. It describes the experience of Elysia Berman, who grew up in a working-class family in Bryn Mawr, Pennsylvania. She got a job as a designer at a fashion magazine at 25 and began to spend lavishly using BNPL plans to try and keep up with her more well-heeled co-workers. But as the bills grew, late fees and interest kicked in. With no other alternative, she began meeting these bills by using her credit card. Over the course of several years she wracked up a $50,000 debt.
“It was like throwing gasoline on a burning fire,” Berman told the Times.
“Each day Berman woke up to notifications on her phone announcing how much money was being automatically siphoned out of her bank account,” the Times said. “The amounts seemed totally arbitrary — $17 first thing Monday, $250 later that night, $141 Tuesday — with no explanation of what items she was even paying for.” Her credit cards maxed out and her savings account emptied.
“You never know what’s going on,” Berman told the Times. “And you can’t budget, because you don’t know what’s leaving your account on what day.”
Like Berman, many of those being sucked into using “buy now, pay later” are young people from working-class families facing increasing difficulties making ends meet.
One 22 year old “ended up owing nearly $4,600 after spending what seemed like just ‘$20 a month here or there,’ on things like groceries, eyelash extensions and a new mattress,” the Times reported. “A woman on TikTok rued how she racked up $32,000 in debt by buying ‘everything under the sun’ on B.N.P.L., not realizing how steep the interest rates could get.”
Affirm Chief Executive Max Levchin responded, claiming this business model “is just perfect for these frankly uncertain times.”
Some of the largest banks are trying to get into the act. They’re offering new credit cards with “buy now, pay later” options. Klarna unveiled the Klarna Card, a debit card powered by Visa that’s “an everyday spending and saving partner, available everywhere and for everything.”
Beware.