Update: Why are people buying groceries with Buy Now, Pay Later?

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Most consumer advocates, including me, suggest that you shouldn’t borrow to buy things you use up before you’ve paid for them.

Yet, the new “Buy Now, Pay Later” fintechs are seducing consumers with the false idea that the product is always free. That’s not true for everyone. Priya Krishna asks in today’s New York Times: “Would You Take Out a Loan to Buy This Week’s Groceries?

While the story correctly notes that if you make all four bi-weekly payments on time, there is no interest, it also finds that some consumers are falling behind and interest and fees are piling up.

And there are signs that the use of these services for repeated, everyday expenses like groceries and restaurant meals is pushing some users, particularly younger people who are already overextended, deeper into debt.

The story goes on to quote the founder of fintech Zilch:

“Why would you take a line of credit out to buy a sandwich?” by using a credit card, he said. “You are doing it today and paying 20 percent interest on it.”

What? I use my credit card at the grocery store every week, simply because it’s a safer transaction than using a debit card. But I also pay off the full balance every month so I don’t pay interest. Unfortunately, around half of consumers do carry credit card debt, but BNPL is not the life preserver it pretends to be to keep consumers from drowning.  It’s a come-on to spend more.

PIRG has long held concerns over BNPL. Our March 2022 report “The Hidden Costs of Buy Now, Pay Later,” asks: “Will buy now, pay later mean pain later?”

We’re monitoring the CFPB’s inquiries and actions over this new gimmick to get consumers to spend more. Consumers facing budgetary crises, perhaps due to the pandemic’s effects on family finances, should know that BNPL is not the answer. Get our PIRG BNPL tips here.

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Hands holding phone with BNPL logo

Ed Mierzwinski

Senior Director, Federal Consumer Program, PIRG

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.

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