Valuetainment - December 12, 2023


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

Topics
spending money
Hosted by
Patrick Bet-David
Mentioned
Klarna Andrew Jackson Charlie Wilson Reformer Sezzle Johnny Split Mike
How To Raise Smart Kids Who Are Aware of Cyberbullying Henry Kissinger Legacy： Hero or Villain？

Episode Stats


Length

10 minutes

Words per minute

220.3

Word count

2,280

Sentence count

257

Harmful content

Toxicity

4

sentences flagged

Hate speech

1

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

In this episode, I talk about the new "Buy Now, Pay Later" system and how it could be the next credit card revolution. I also talk about why you should not fall into the debt trap and how to avoid falling into it.

Transcript

Transcript generated with Whisper (turbo).
Toxicity classifications generated with s-nlp/roberta_toxicity_classifier .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
Topics generated with Qwen2.5-3B-Instruct.
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
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.