Valuetainment - Why “Buy Now Pay Later” is Worse Than Credit Cards

00:00:00.000 Have you heard about this new alternative to credit cards that's allowing them to get paid

00:00:03.360 anywhere between 17% to 70% annually and avoid going through the Truth in Lending Act that

00:00:08.800 came out to protect consumers from being destroyed by credit cards? Have you heard about this new

00:00:13.020 thing? It's called buy now, pay later. Guess who's using it? Affirm, Klarna, Apple, PayPal,

00:00:17.940 and they're making so much money and so attracted to the consumer because the consumer says,

00:00:21.140 babe, this thing here is a thousand bucks. I can't pay a thousand right now. But guess what?

00:00:25.060 This buy now, pay later allows me to pay only 25% right now, which is $250. And I get to pay the

00:00:30.460 other in three payments, $250, $250, $250 over the next six weeks. And I own it in many cases. This

00:00:36.180 is 0%. How cool is this? Then how do they make their money? Well, these companies like Klarna on

00:00:41.580 the back end get paid 2% to 8% from the person that's selling the product. So for example, Apple

00:00:47.040 would send Klarna, this is a thousand dollar product. Hey, we'll give you $20 to $80. So that's

00:00:52.380 how they're making their money. A couple of different ways, but God forbid, if you miss

00:00:55.300 a payment, it goes to 30%. And by the way, more than four in 10 Americans who have taken

00:00:58.940 out one of these buy now, pay later loans have made a payment late on one of those loans,

00:01:03.180 according to a new survey from LendingTree, which is why 23% of BNPL customers have regretted

00:01:09.580 financing a purchase this way. So why are people using it? I don't know, babe, but it's a hot

00:01:13.580 phenomenon. They're making a lot of money. Let alone on top of this, credit card companies

00:01:17.640 today just increased their rates. It's the highest it's ever been. $3.57 trillion of

00:01:22.940 available credit. Do you know banks, the largest banks in America, raised limits on 18.4 million

00:01:28.920 credit cards in America in the first quarter of this year. It's up 22%. Why are they doing

00:01:33.280 this? Making a lot of money. And then on top of that, they opened a record-breaking $89 billion

00:01:37.980 worth of new credit card accounts in the first quarter of 2023, all because interest rates are

00:01:43.600 increasing and they're finding another way to make money. I got so much stuff to share with you

00:01:47.120 here right now, but this is concerning for me. I've been in debt before and there are some quotes

00:01:51.320 about debt. I want to read you and we'll get into the episode. First one is, he who is quick to borrow

00:01:56.160 is slow to pay. You know how I know that? I've been quick to borrow many times in my early 20s.

00:02:01.060 Here's the next one for you. If you think nobody cares if you're alive, try missing a couple of car

00:02:05.380 payments. Earl Wilson. They will call you and they will get their money. And last but not least,

00:02:09.280 which is the heaviest one. Andrew Jackson. When you get in debt, you become a slave. These companies

00:02:15.480 are producing a lot of slaves today.

00:02:26.800 If you get value out of this video, give it a thumbs up and subscribe to the channel. So let's get into it.

00:02:30.360 If this is such a weird thing, why are people doing it? Well, because, listen, companies want you to

00:02:35.240 spend money. The government wants you to spend money. That's how GDP goes up. The more money you spend,

00:02:39.040 the better it is. Companies are making money. Do you think people are waking up in the morning and

00:02:42.420 say, let me find a way to prevent you from getting into debt? No. They own you. It's like a drug dealer.

00:02:46.800 Get addicted. Spend the money. Get addicted. I buy. I make more money. Get addicted to this video game.

00:02:52.340 Buy another NFT. Buy another this. The more you get addicted, the more money I'm going to be making.

00:02:56.560 Fine. That's okay. No problem. You make a very good movie. Maybe I'm addicted to it. You make a very

00:03:01.080 good book. I'm addicted to reading it. Fine. We can talk about that, but you as an individual have to

00:03:05.040 make a choice so you don't fall for this trap because it's very stressful. I remember being in

00:03:08.960 debt, $49,000. My credit score being 484, 495, 499. Something happens to men when you're in debt.

00:03:14.660 You can't lead better. You can't be a good father, husband. Your temper's short. Your

00:03:18.800 fuse is short. You're irritated with people around you because you're in debt and you don't

00:03:22.380 know how to pay for it. You file a BK. Do you not file a BK? It's very stressful. So watch this.

00:03:26.400 70% of America's GDP is generated from consumer spending. 70% of the GDP is stemmed from you spending

00:03:33.900 money. With interest rates at 5% and a much higher cost of living, consumers are getting

00:03:38.720 squeezed. Personal saving rates are near record low levels. When you look at this chart, we are

00:03:44.520 not saving a lot of money, but damn, we're spending a lot of money right now. So then the question

00:03:48.760 becomes, you'll hear our politicians say, look at the GDP growing. It's been the best growth of GDP

00:03:53.240 we've had in the last seven quarters. It's amazing. It's record breaking. Look at this chart right here.

00:03:58.500 Q3, 2023. GDP grew by 4.9%. How? Because you're contributing towards it. You're spending money.

00:04:04.560 And you know what the president says? On behalf of the White House, I just want to say thank

00:04:08.640 you for your spending money, whether it's buy, not pay later, credit cards. You're helping

00:04:12.780 us have very good number. Thank you so much for spending money.

00:04:15.600 By the way, that's kind of like in MBS, you know, Saudi Arabia, 42% of their GDP comes

00:04:19.860 from oil. You consumers are oil to the US economy.

00:04:23.820 So let's take a look at some of this data from buy, not pay later. The market for buy, not

00:04:27.040 pay later, some call it BNPL, an alternative to credit cards whose popularity exploded during

00:04:32.160 the pandemic is expected to reach $4 trillion in 2030. Consumers are taking advantage of ways

00:04:39.080 to pay for goods and services in interest-free installments. Markintel Advisors estimates the

00:04:44.860 total number of BNPL users will exceed $1.5 billion by 2030, from $403 million in the first

00:04:52.960 half of 2023. That's nearly 4x in seven years. And by the way, if you're wondering how it was

00:04:58.920 this last Christmas, here's what it looks like. Dear Santa, can I pay later? This year,

00:05:02.960 2021, BNPL, $12.8 billion. 2022, $14.5 billion. 2023, $17 billion, if you want to know a little

00:05:10.740 bit deeper what ethnicity and background uses this the most. Whites, only 16%. Hispanics,

00:05:16.240 24%. Blacks, 26%. And if you were to take a wild guess, which household income you think 0.99

00:05:21.360 uses this more? Over $75,000 or under $75,000? I'm sure you got this one right. 73% of those

00:05:28.560 under $75,000 use this. 17.6% only use it above $75,000. And watch this age category.

00:05:36.560 18 to 24, 42%. 25 to 34, 50%. 35 to 44, 50%. 45 to 54, 33, 55 plus, 19%. So if you're like

00:05:47.480 me and you're wondering why people are even using this, these are the top reasons why people

00:05:50.240 use it. Number one, easier to make payments. Two, flexibility, lower interest rates, easy

00:05:54.780 approval process. It's a soft credit check is what they call it. Credit cards are maxed

00:05:59.560 out. No interest, low credit card limit. Now if you're wondering what they're spending

00:06:04.000 it on, here's a chart to tell you what they're spending on according to LendingTree. Clothing,

00:06:07.740 buy a mile at the top. Technology items, then shoes, home decor, furniture, accessories, beauty

00:06:13.120 products, jewelry, sporting or fitness equipment, toys, travel books, event tickets, and other.

00:06:17.280 And the most popular BNPL company is being used right now. At the top is PayPal, then

00:06:21.080 it's Afterpay, then Klarna, then Affirm, then Zip, then Sezzle, then Split it, and then

00:06:25.320 other. And as of October, 2023, Apple has officially launched this for U.S. residents. Congratulations,

00:06:32.360 folks. So the question becomes, so if you miss a payment, if it's not, if they're not following

00:06:36.160 the guidelines of Truth and Lending Act, there's no way they can report to your credit if you

00:06:40.640 miss a payment, right? Here's what happens. Consequences of missing a buy now, pay later

00:06:45.000 payment. Charging interest on the unpaid balance. Turning over your account to a collection agency.

00:06:51.060 Damaged credit score not allowing you to make future purchases with the plan. So your credit

00:06:55.520 score will take a hit. Okay, so final thoughts. Look, I want to kind of get you thinking here

00:06:59.700 as the consumer, because this is what this did to me when I'm thinking about it. We got three

00:07:02.940 parties involved, right? The first party is what? The consumer. Oh, this is great. 25% up front,

00:07:07.780 25, 25, 25. How awesome is it? I just bought a $1,000 thing for $250. I like this, okay? Then it's the

00:07:13.800 buy now, pay later companies that are charging this service. They're in the middle. And then

00:07:17.520 there's the company that's selling the product. Guess who likes this program the most? If we were

00:07:22.020 to rank it, guess who likes the most? These guys. Who has the least risk? These guys. I sold the

00:07:27.960 product. I got my money. Yeah, I gave this guy in the middle 2% to 8%. I don't care. Product was $100.

00:07:32.500 I give you $2 to $8. Cool. Go collect the debt. I don't need to collect the debt. That's your job to do.

00:07:38.280 So these guys have the least amount of risk, okay? These guys have a lot of risk,

00:07:42.660 because they may not get the money back. And then these guys have risk as well. So,

00:07:45.860 but I understand the dynamics between the three. That's BNPL stuff. It's another creative way of

00:07:49.720 getting money from the consumer, putting you into that and getting you to pay for it. They're

00:07:52.780 going to end up getting their money. Apple's going to get their money. You know why? Okay,

00:07:55.680 go ahead and go make the payment. Go be late on the payment. You know what Apple can turn off?

00:07:59.320 Called this right here. Smartphone, PayPal. Go ahead and go make the payment. You can no longer bid on

00:08:04.340 eBay. No, I got to be able to bid on eBay. They have controls to do this. Smaller companies,

00:08:09.120 you may not need Klarna or Reformer or all these other guys, but I'm not a fan of this at all.

00:08:14.180 I've been in debt before. It sucks. I just want to talk to you while you're watching this, 0.95

00:08:18.240 if you're still around with us, because this is not a very exciting topic. It's debt. Who the hell

00:08:22.840 wants to talk about credit card debt and buying a pay letter? You would much rather go buy the clothes

00:08:26.860 and show the Louis purse you got or the nice phone you got. Here's what I will tell you. Being in debt

00:08:31.080 sucks. You are a slave. You can't sleep. It affects the way you parent. It affects the way you treat 1.00

00:08:38.120 your spouse. It affects the way you are as a son or a daughter. It affects the way you are as an

00:08:41.920 employee. It affects the way you are as a friend. It affects your dreams, your life, your peace,

00:08:46.980 your happiness. Prevent yourself from being tempted for financing things you shouldn't be buying in

00:08:53.200 the first place and increase your cash and go on a credit card or buy not pay later diet for 10 years

00:09:02.040 and see if you can do that. See what it'll do to you. It'll be one of the best decisions you ever

00:09:07.060 make in your life if you can resist from this bullshit temptation that they're selling your 0.98

00:09:10.720 way. Anyways, Mike asked me a good question. He says, Pat, isn't this an example of bad capitalists? 0.97

00:09:14.820 I said, not at all. He says, what do you mean? These guys are making billions of dollars ripping

00:09:18.460 clients off. I said, no. The consumer's at fault. Why are you buying it? Why are you falling for it?

00:09:22.320 He said, I'm a bartender. You come to my bar and I'm a sick bartender, which means what? How you doing?

00:09:27.440 How's everything, Johnny? Wife is good. Tell me about your day today. Bad day today. Really? What happened?

00:09:31.880 What happened at work? No way. Here, you want another one? You want another one? Man, I'm so

00:09:36.360 sorry to hear. Hour and a half later, I got you drunk and your bill is $140. You tip me $40. I'm a

00:09:41.900 great bartender, but you had $1,000 in the bank. You just gave me 20% of your savings. You should

00:09:46.680 have never come to the bar. So what am I, the bad guy? No, the consumer is. You got to control your

00:09:51.180 decisions. We, you and I. And this, if you notice, I'm getting emotional because I was here just 23 years

00:09:57.120 ago. I'm 45 at 22, 23. I was addicted to credit cards and getting myself in a bad situation.

00:10:02.520 Anyways, if you got value out of this video, give it a thumbs up and subscribe to this channel. By

00:10:05.920 the way, if you've never watched an old school video I did, which it applies any time of the

00:10:10.620 day because it's evergreen, go watch 20 Rules of Money. These 20 rules is why I have a couple

00:10:17.860 dollars today. Take care, everybody. Bye-bye, bye-bye.

Valuetainment - December 12, 2023

Why “Buy Now Pay Later” is Worse Than Credit Cards

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