Karen Webster identifies 'buy now, pay later' loans as essential working capital for the modern middle class.
Karen Webster, chief executive of Pymnts, describes 'buy now, pay later' (BNPL) loans as the 'working capital for the modern middle class.' These short-term financing options have expanded beyond online shopping to cover basic household expenses such as rent, electricity, and health insurance. Americans spent $160 billion through BNPL loans last year, nearly doubling the amount from 2023, according to Federal Reserve economists. While lenders argue that BNPL services solve timing issues for consumers, experts warn of the dangers of 'loan stacking,' where borrowers juggle multiple loans and lose track of debt. A LendingTree study found that 47% of users made at least one late payment in the past year. Furthermore, because most lenders do not report these loans to credit bureaus, they can create 'phantom debt' that is not reflected in traditional credit scores. Consumers are encouraged to ask if they can afford the purchase rather than just the monthly payment.
Sources
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‘Buy Now, Pay Later’ Lenders Pitch Loans for Needs Like Electricity and Rent
The New York Times
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Working Capital
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I-Team Quick Tip: Buy now, pay later warning
ABC7 Chicago
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In Trump's Economy, Companies Offer 'Buy Now, Pay Later' for Utilities as Costs Surge
Common Dreams
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From Sneakers to Rent: ‘Buy Now, Pay Later’ Expands as Americans Struggle to Make Ends Meet
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