--:-- Alexi Horowitz-Gazi: This is Planet Money from NPR. This is the story of how Amelia Schmarzo fell into a kind of rabbit hole, one that involved a lot of online shopping. But the story isn't about the stuff she bought as much as the new way she found to pay for that stuff.
--:-- Alexi Horowitz-Gazi: It starts a couple years ago in the spring of 2020 when Amelia found herself, like so many of us, locked down at home, bored, scared, going a little stir crazy.
--:-- Taylor Washington: I was like, who am I? Like, what is going on? Like, oh my gosh, did I hit a midlife crisis at the age of 20?
--:-- Alexi Horowitz-Gazi: I was like, I need to find new passions that I can, new hobbies to keep myself busy.
--:-- Taylor Washington: So Amelia's a junior in college. She's living in an apartment in San Diego, and she started doing these at-home exercise videos that were made by influencers she saw on social media.
--:-- Alexi Horowitz-Gazi: Good morning, everyone, and welcome back to my channel. You have three pound, 10 pound and 20 pound waist. I like swear these are what makes your butt grow.
--:-- Taylor Washington: And then I found influencers who follow these influencers. And so that is how I kind of got into the realm of getting influenced by influencers.
--:-- Alexi Horowitz-Gazi: That's how you fell under the influence.
--:-- Taylor Washington: Absolutely.
--:-- Taylor Washington: Amelia says the lives of these trendy jet setting zoomers just felt so glamorous. And she's like, maybe if I get the right clothes and accessories, Maybe my life could be more like that.
--:-- Alexi Horowitz-Gazi: I mean, we've all been there. They look pretty. They look confident. I want those words, people to describe me as that.
--:-- Taylor Washington: A lot of the influencers Amelia is following are constantly showing off their new outfits. Welcome back to my channel. Today I have a summer clothing haul for you guys.
--:-- Alexi Horowitz-Gazi: Then there will be a link to the websites where you can buy exactly what they're wearing.
--:-- Taylor Washington: And in one of these videos, Amelia sees the bikini. Oh yeah, it was literally like a white and brown tie-dye bikini. It doesn't sound that special, but to Amelia, it felt like the first step to reinventing herself.
--:-- Alexi Horowitz-Gazi: So she clicked the link. The price was somewhere around $200 for the bikini.
--:-- Taylor Washington: And had you ever spent that kind of money on a piece of clothing before?
--:-- Alexi Horowitz-Gazi: No, not even close.
--:-- Taylor Washington: But then Amelia notices an offer in small type just below the total. Four interest-free payments of $41.99 with afterpay.
--:-- Alexi Horowitz-Gazi: It just felt so cheap, you know? I was like, that is so affordable. $41.99.
--:-- Taylor Washington: And if I sat there and I genuinely was like $41.99 times four, I probably wouldn't have bought it.
--:-- Alexi Horowitz-Gazi: Yeah.
--:-- Taylor Washington: But I was like, oh, I'm easily going to get $41 next month. Like, that's nothing to worry about.
--:-- Alexi Horowitz-Gazi: So suddenly, the most expensive garment you've kind of considered buying feels like it's actually a bit of a bargain?
--:-- Taylor Washington: It really does. You're like, I just locked into a kind of a steal. I'm like, wow, I'm paying $41 for a $200 bikini? Like, I am a genius.
--:-- Alexi Horowitz-Gazi: This was Amelia's first experience with a kind of payment called buy now, pay later.
--:-- Taylor Washington: After an extremely cursory credit check, the kind that won't affect her credit score, she's approved, clicks the purchase button.
--:-- Alexi Horowitz-Gazi: The company, Afterpay, charges her card for the first installment. They accept credit or debit. She chooses credit.
--:-- Taylor Washington: And the bikini is on its way. The process was that simple.
--:-- Alexi Horowitz-Gazi: And so a few days later, when she sees another influencer showing off something else she liked.
--:-- Taylor Washington: So I guess we'll start off with my most favorite pair of sneakers that I own.
--:-- Alexi Horowitz-Gazi: Amelia clicks the link. And again, she sees that buy now, pay later option.
--:-- Taylor Washington: It literally made the price, like I kid you not, like $8.
--:-- Alexi Horowitz-Gazi: So in that mindset, I was like, oh my gosh, I can afford the world.
--:-- Taylor Washington: And so I, that's why I threw in that swimsuit and I threw in the jacket and the jeans and...
--:-- Alexi Horowitz-Gazi: Hit me. Yeah, right?
--:-- Taylor Washington: I'm like, put them all in the cart. Yeah.
--:-- Alexi Horowitz-Gazi: And my total was literally like $20.
--:-- Taylor Washington: So how does this pick up? Like, is it over the next like couple weeks? Is it months?
--:-- Alexi Horowitz-Gazi: I would say days, to be honest.
--:-- Taylor Washington: Before she knows it, Amelia has fallen into a kind of shopping spiral.
--:-- Alexi Horowitz-Gazi: I got like a whole bunch of like really nice jeans from Aritzia.
--:-- Taylor Washington: She got fancy sweatpants, sweatshirts. Because sweatsets were super in, right? Because you weren't leaving the house.
--:-- Alexi Horowitz-Gazi: A bunch of new shoes. Brand new high heels, Jordans, Yeezys.
--:-- Taylor Washington: Buying stuff online was the only thing that really gave me that like adrenaline.
--:-- Alexi Horowitz-Gazi: You know what I mean? When it came in the mail, because there was nothing else going on, it was so exciting.
--:-- Taylor Washington: It felt like Christmas.
--:-- Alexi Horowitz-Gazi: Amelia says all of the packages arriving on her doorstep felt kind of like gifts.
--:-- Taylor Washington: Like some mysterious stranger was footing the bill for everything on her list just out of the goodness of their corporate heart.
--:-- Alexi Horowitz-Gazi: I'm not gonna lie, it felt free. Like it literally felt like free money because I didn't see it.
--:-- Taylor Washington: It wasn't cash. I don't know. It just felt like it was never going to catch up.
--:-- Alexi Horowitz-Gazi: It just all felt like monopoly money.
--:-- Taylor Washington: So you're like watching Tiger King mashing that buy now, pay later button.
--:-- Alexi Horowitz-Gazi: Life was good.
--:-- Taylor Washington: What was the first sign that trouble might be brewing?
--:-- Alexi Horowitz-Gazi: I didn't think about it literally until I got an email from Discover saying your statement is ready to be viewed.
--:-- Taylor Washington: One thing to know about Amelia, before she started using Buy Now Pay Later, she was pretty allergic to using her credit card at all.
--:-- Alexi Horowitz-Gazi: It was when her dad helped set up for essentials and emergencies.
--:-- Taylor Washington: And her statement had only ever been a few hundred dollars at the very most.
--:-- Alexi Horowitz-Gazi: But this time? I saw that it was $2,000, which was my limit.
--:-- Taylor Washington: And then I saw my debit card went from $700 to like $20.
--:-- Alexi Horowitz-Gazi: And that's when I was like, I am going to throw up. Like, how did this happen?
--:-- Taylor Washington: Hello and welcome to Planet Money.
--:-- Alexi Horowitz-Gazi: I'm Alexi Horowitz-Gazi. And I'm Taylor Washington.
--:-- Taylor Washington: At its most basic, a loan is a way to get money now in return for a little bit extra. Or a lot.
--:-- Alexi Horowitz-Gazi: When you pay it back down the road. That's been true as far back as, I don't know, ancient Babylon.
--:-- Taylor Washington: But all of a sudden, over the past couple of years, there's been an explosion of new companies offering what is essentially free money.
--:-- Alexi Horowitz-Gazi: A no interest loan.
--:-- Taylor Washington: Today on the show what exactly is Buy Now Pay Later? How it works and why it seems to be everywhere.
--:-- Alexi Horowitz-Gazi: And should we be worried?
--:-- Taylor Washington: We originally reported the story of Amelia back in 2022.
--:-- Alexi Horowitz-Gazi: Since then Buy Now Pay Later has continued to spread across the economy and people are using it for all sorts of basic necessities as living costs shoot up.
--:-- Taylor Washington: All right as credit scores are falling, especially among Gen Z.
--:-- Alexi Horowitz-Gazi: So today we're going to revisit our original episode on how companies like Klarna and Afterpay and Affirm make money, and we'll get an update on Amelia in 2025.
--:-- Taylor Washington: We'll find out exactly who is using Buy Now Pay Later now, and if it's ever a good deal for you, for Amelia, for the economy.
--:-- Alexi Horowitz-Gazi: This message comes from NPR sponsor Zendesk.
--:-- Taylor Washington: Introducing the next generation of AI agents built to deliver resolutions for everyone.
--:-- Alexi Horowitz-Gazi: With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30% of interactions instantly.
--:-- Taylor Washington: Quickly giving your customers what they need.
--:-- Alexi Horowitz-Gazi: Loved by over 10,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier.
--:-- Taylor Washington: That's the Zendesk AI effect.
--:-- Alexi Horowitz-Gazi: Find out more at zendesk.com.
--:-- Taylor Washington: Okay, so Taylor Washington, you are a producer here on the show.
--:-- Taylor Washington: Yep.
--:-- Alexi Horowitz-Gazi: And you first brought up Buy Now, Pay Later in one of our editorial meetings a while back.
--:-- Taylor Washington: Yeah, so I heard about it a while ago because all of a sudden I saw a ton of people my age, you know, fellow Zoomers were using it.
--:-- Alexi Horowitz-Gazi: Yeah.
--:-- Taylor Washington: And they were going on these crazy shopping sprees all over TikTok.
--:-- Alexi Horowitz-Gazi: A lot of people jumping in headfirst, just like Amelia.
--:-- Taylor Washington: And so it seems like something we should look into.
--:-- Alexi Horowitz-Gazi: Right.
--:-- Taylor Washington: Okay, and we will get back to Amelia's story in a bit.
--:-- Taylor Washington: But Taylor, what I remember from when you first pitched this was that a lot of us kind of knew what you were talking about.
--:-- Alexi Horowitz-Gazi: Like we'd seen these buy now, pay later options online, but nobody really understood like how it actually works.
--:-- Taylor Washington: Yeah, so people started talking about payday loans or rent to own or layaway because with layaway, you also pay in installments, but you don't get the thing until it's paid off.
--:-- Alexi Horowitz-Gazi: Yeah, that's what buy now, pay later feels like. Good old fashioned layaway.
--:-- Taylor Washington: This is Terry Bradford. She's a payments expert at the Kansas City Fed.
--:-- Taylor Washington: And a couple years ago, she had her colleague Julian.
--:-- Taylor Washington: Julian Alcassar. I also work at the Federal Reserve Bank of Kansas City.
--:-- Taylor Washington: They teamed up to start looking into buy now, pay later.
--:-- Taylor Washington: How would you kind of describe your dynamic as a duo?
--:-- Taylor Washington: Are you more like a Batman and Robin style thing? Are you like Sherlock Holmes and Dr. Watson?
--:-- Taylor Washington: You know what? I would say we're Woodward and Bernstein.
--:-- Taylor Washington: How about that?
--:-- Alexi Horowitz-Gazi: Ooh, yeah.
--:-- Taylor Washington: Those are terms that we can understand.
--:-- Taylor Washington: Okay, so when our financial Woodward and Bernstein started looking into buy now, pay later a couple years ago, the business model was still a bit of a mystery to them.
--:-- Taylor Washington: But one thing was clear. It's credit by another name.
--:-- Taylor Washington: That's what it is, yeah.
--:-- Taylor Washington: So it's not unlike, I guess, buying a car or buying a house.
--:-- Taylor Washington: The difference is you aren't paying interest, you know?
--:-- Taylor Washington: Yeah, yeah.
--:-- Taylor Washington: It almost is like too good to be true.
--:-- Taylor Washington: Too good to be true because here's what most buy now, pay later companies are offering.
--:-- Taylor Washington: They're saying as long as you are able to clear a pretty low bar, like a soft credit check that won't show up on your credit score, they will spot you the money for whatever you're buying.
--:-- Taylor Washington: You agree to pay them back in four installments.
--:-- Taylor Washington: They collect the money from whatever bank account or debit or credit card you want, and those payments are all interest-free.
--:-- Taylor Washington: Which raises a pretty big question. If most customers are not paying any interest... how are you making money on this?
--:-- Taylor Washington: Interest-free loans, where's the value proposition in that?
--:-- Taylor Washington: Yeah.
--:-- Taylor Washington: So where was the money coming from, right?
--:-- Taylor Washington: Right.
--:-- Taylor Washington: Where was the money coming from?
--:-- Taylor Washington: Lending money is usually a big moneymaker because of some combination of interest and fees.
--:-- Taylor Washington: But when Terry and Julian peaked under the hood of the business model, not only are the companies not charging interest, the fees generally aren't super high either.
--:-- Taylor Washington: So for customers, as long as they don't buy more than they can afford, which is obviously a big if, these loans can be a great deal.
--:-- Taylor Washington: Basically the cheapest money you can get.
--:-- Taylor Washington: I was always expecting this gotcha moment.
--:-- Taylor Washington: Yeah.
--:-- Taylor Washington: And it wasn't coming around.
--:-- Taylor Washington: So I was very, like, where's the surprise?
--:-- Taylor Washington: I was, you know, when you watch a scary movie and you could hear the suspenseful music and then there's Michael Myers behind the door?
--:-- Taylor Washington: That's what I was expecting.
--:-- Taylor Washington: The gotcha moment was not what they expected.
--:-- Taylor Washington: Instead of making money by gouging their customers with hidden fees, it turned out buy now, pay later companies were taking their cut from the other side of the transaction.
--:-- Taylor Washington: From the businesses actually selling the goods.
--:-- Taylor Washington: So it goes between 4% and as high as 9.5% is what merchants are paying buy now, pay later firms.
--:-- Taylor Washington: Credit card companies usually charge merchants anywhere from 2% to 4%.
--:-- Taylor Washington: So buy now, pay later companies are often asking for a way bigger cut.
--:-- Taylor Washington: So I just want to break this down clearly.
--:-- Taylor Washington: They're saying we're going to charge you around double of what credit cards charge per item that you sell using our payment service.
--:-- Taylor Washington: Yeah, it doesn't quite seem to jive, does it?
--:-- Taylor Washington: What makes it jive is that credit card charges are widely variable, depending on whether it's a MasterCard or an Amex or a Visa and whether there are rewards.
--:-- Taylor Washington: It makes things harder to predict.
--:-- Taylor Washington: Also, credit cards come with these pesky consumer protections that put businesses on the hook if customers complain.
--:-- Taylor Washington: So if something goes wrong and the product that they bought broke or didn't perform to their satisfaction, they have the right to request a charge back.
--:-- Taylor Washington: And so the merchant could have that whole amount that they'd received withdrawn by the credit card company because the customer said the product was no good for them.
--:-- Taylor Washington: Right.
--:-- Taylor Washington: So if you've ever asked your credit card company for a refund because the thing you bought turned out to be junk, that's what she's talking about.
--:-- Taylor Washington: That can be a big pain for businesses.
--:-- Taylor Washington: But the biggest reason that businesses are signing up for Buy Now Pay Later is that it's helping them sell more stuff.
--:-- Taylor Washington: For example, by bringing in a new pool of customers.
--:-- Taylor Washington: Because what Terry and Julian saw as they dug through pitch decks and advertisements and influencer videos was that at first buy now pay later companies were targeting a pretty specific demographic
--:-- Taylor Washington: They wanted to offer small loans at the point of sale to reach people who don't usually buy on credit.
--:-- Taylor Washington: Which is actually a lot of people.
--:-- Taylor Washington: For example, people who don't have much of a credit history, people who have bad credit, or people like Emilio, who grew up during and after the financial crisis and are more reluctant to use credit cards at all.
--:-- Taylor Washington: All of those people might not have bought anything without Buy Now, Pay Later.
--:-- Taylor Washington: So not only are businesses getting new customers, but many of those customers are young.
--:-- Taylor Washington: As they get older, they'll likely earn more money, and they might come back and spend it.
--:-- Taylor Washington: On top of that, Julian says Buy Now, Pay Later helps retailers with a problem they call cart abandonment.
--:-- Taylor Washington: Which will be familiar to almost anyone who's shopped online.
--:-- Taylor Washington: Most consumers will put items in their virtual shopping cart.
--:-- Taylor Washington: And then when it comes time to check out, they'll be like, I don't need to spend $200.
--:-- Taylor Washington: And so what Buy Now, Pay Later does, it actually reduces card abandonment because it makes large purchases seem smaller to the consumer.
--:-- Taylor Washington: Remember Amelia and her monopoly money?
--:-- Taylor Washington: The lower price tag can lead people to buy more than they would have otherwise.
--:-- Taylor Washington: Now, Buy Now, Pay Later has been growing in the U.S. since at least 2015.
--:-- Taylor Washington: But it reached critical mass at the perfect moment, just as the pandemic set in.
--:-- Taylor Washington: All of a sudden, online retail exploded.
--:-- Taylor Washington: And Terry says, so did the number of Buy Now, Pay Later services.
--:-- Taylor Washington: It was Afterpay and Affirm and Klarna and Zezil and Zip.
--:-- Taylor Washington: Like, how many of these things are there?
--:-- Taylor Washington: Yeah.
--:-- Taylor Washington: And you were also hearing about the partnerships that they were beginning to form with large merchants, like Amazon, for example, and Target.
--:-- Taylor Washington: And it was kind of like, okay, wait a minute, what is happening?
--:-- Taylor Washington: And they're popping up absolutely everywhere.
--:-- Taylor Washington: Buy Now, Pay Later was no longer this niche thing, mostly targeting young people allergic to credit by partnering with trendy brands.
--:-- Taylor Washington: It was the new form of payment for all kinds of purchases.
--:-- Taylor Washington: One thing that I found is that there's a Buy Now, Pay Later firm for just about anything, from small business to medium-sized business financing to auto repair to helping you remodel your home in four easy payments to even healthcare.
--:-- Taylor Washington: This might be TMI.
--:-- Taylor Washington: I had to get my wisdom teeth taken out.
--:-- Taylor Washington: And my dentist can take my wisdom teeth out using Buy Not Pay Later.
--:-- Taylor Washington: And that was wild.
--:-- Taylor Washington: That's where I was like, this is a little much.
--:-- Taylor Washington: And talk about deep throat.
--:-- Taylor Washington: We've looped back around.
--:-- Taylor Washington: So when our investigators take a step back, here is what they see.
--:-- Taylor Washington: Buy Now Pay Later is finding its way into more and more corners of the economy.
--:-- Taylor Washington: It can be a pretty good deal for customers, and it looks pretty good for businesses.
--:-- Taylor Washington: But you know who is not totally thrilled?
--:-- Taylor Washington: Besides Amelia, of course.
--:-- Taylor Washington: Credit card companies.
--:-- Taylor Washington: And some of the big banks behind them.
--:-- Taylor Washington: what they've been doing to fight back after the break.
--:-- Taylor Washington: Loans are basically the oldest financial technology in the book.
--:-- Taylor Washington: But since the 1960s, when you think about how people pay with credit for everyday things, you usually think about credit cards.
--:-- Taylor Washington: So you can imagine how threatening this explosion of buy now, pay later was to stodgy old banks and credit card companies.
--:-- Taylor Washington: There was one report that showed that banks lost between $8 and $10 billion in revenue to buy-now-pay-later offerings.
--:-- Taylor Washington: Wow.
--:-- Taylor Washington: Because as buy-now-pay-later grew more popular, a lot of people started using it instead of credit cards, which means a lot less transaction fees and interest payments for the credit card companies and the banks behind them.
--:-- Taylor Washington: And those banks, they obviously weren't going to stand for it.
--:-- Taylor Washington: Financial institutions don't generally just sit back and let things happen to them.
--:-- Taylor Washington: And so the banks and credit card companies are trying to fend off this horde of new competitors.
--:-- Taylor Washington: At least one bank, Capital One, is refusing to let their credit cards be used for most buy now, pay later purchases.
--:-- Taylor Washington: But for the most part, banks and credit card companies are getting in on the action.
--:-- Taylor Washington: They're acquiring buy now, pay later companies outright or rolling out their own services that look a lot like buy now, pay later.
--:-- Taylor Washington: And this is why it is now possible to buy your plane ticket to go get your wisdom teeth removed.
--:-- Taylor Washington: While wearing your new Yeezys.
--:-- Taylor Washington: And pay for it all later.
--:-- Taylor Washington: And the way the system is currently set up, a lot of that spending does not get reported to the credit bureaus.
--:-- Taylor Washington: Which brings us to the part of Buy Now, Pay Later that got Amelia into trouble.
--:-- Taylor Washington: Every time she chose to pay later, she was taking out a little loan for the sneakers or the sundress or whatever.
--:-- Taylor Washington: But the company giving her that little loan had no idea how many other little loans she had already taken out from other buy now, pay later companies.
--:-- Taylor Washington: And this is where people like Terry and Julian see the greatest potential danger.
--:-- Taylor Washington: One of the things that really set off the alarms was the opportunity for overextension from the consumer.
--:-- Taylor Washington: Because when compared to a traditional credit card or even personal loan, they will check if you have good or no credit or if you have outstanding loans.
--:-- Taylor Washington: Buy now, pay later firms had no idea how many buy now, pay later products a consumer was using.
--:-- Taylor Washington: So the opportunity to stack was fairly easy.
--:-- Taylor Washington: The same thing happened with credit cards when they first came on the scene in the 1960s.
--:-- Taylor Washington: This new kind of credit became available to more and more people.
--:-- Taylor Washington: And it was so different from what was possible before, so unregulated, that a lot of people got in over their heads, spent more than they could afford.
--:-- Taylor Washington: People like Amelia.
--:-- Taylor Washington: When you're just in a state of panic, you just have so many things on your mind.
--:-- Taylor Washington: I was pacing. I was sweating. I was crying.
--:-- Taylor Washington: So I was like, that's it. I have to call my dad.
--:-- Taylor Washington: She maxed out her credit card and almost emptied her checking account after around a month of buying now and paying later
--:-- Taylor Washington: She did manage to get her dad on the phone.
--:-- Taylor Washington: Did he play the dad card?
--:-- Taylor Washington: Was he like I not mad I just disappointed?
--:-- Taylor Washington: Oh no no he was mad.
--:-- Taylor Washington: He was like, I am mad.
--:-- Taylor Washington: She got a whole lecture.
--:-- Taylor Washington: He was like, Amelia, that's very dangerous.
--:-- Taylor Washington: Installment payments are extremely dangerous.
--:-- Taylor Washington: Like, this affects your future.
--:-- Taylor Washington: He's like, you're not paying $10, you're paying $40.
--:-- Taylor Washington: He did not bail her out.
--:-- Taylor Washington: Amelia had to pay off all that spending by herself.
--:-- Taylor Washington: And how did the conversation end?
--:-- Taylor Washington: Like, what did you, what did you agree on?
--:-- Taylor Washington: Just to stop using it, pay off what I had to pay off and don't continue using it.
--:-- Taylor Washington: Like, if you really want something that's expensive, you're going to have to take that money out of your savings and pay for it right then and there.
--:-- Taylor Washington: I had to wait for your next paycheck.
--:-- Taylor Washington: Like, I think I was like, what, 20 at the time and 19 or 20.
--:-- Taylor Washington: And he was like, you don't, you shouldn't be able to afford all this right now.
--:-- Taylor Washington: And you simply like, you clearly can't.
--:-- Taylor Washington: So pay off what you have to do and don't put anything else on it.
--:-- Taylor Washington: And how long did it take before you bought now and paid later again?
--:-- Taylor Washington: Like two weeks.
--:-- Taylor Washington: I didn't learn.
--:-- Taylor Washington: That was 2022.
--:-- Taylor Washington: And for a while after, Amelia says, she kept using buy now, pay later a lot.
--:-- Taylor Washington: It got to the point where it just kept getting texts like $22.99 is being pulled out from this debit.
--:-- Taylor Washington: $22.99 here, $22.99 there, adding all the way up to $900.
--:-- Taylor Washington: These charges were piling up.
--:-- Taylor Washington: I was using different platforms.
--:-- Taylor Washington: I was using Klarna, Afterpay, and probably Affirm all at once.
--:-- Taylor Washington: It feels like you're just being buried alive.
--:-- Taylor Washington: After another year and a half of buying, Amelia woke up one morning and realized she had more texts from these companies than from her friends.
--:-- Taylor Washington: The later in Buy Now, Pay Later had finally arrived.
--:-- Taylor Washington: That's when I was like, okay, if I can't manage it, then I need to just cut this out because I can't have nice things clearly.
--:-- Taylor Washington: I'm not capable.
--:-- Taylor Washington: So two years ago, Amelia decided to go cold turkey.
--:-- Taylor Washington: No more Buy Now, Pay Later.
--:-- Taylor Washington: She says she hasn't used it since.
--:-- Taylor Washington: And she's paid off all of her Buy Now, Pay Later debt.
--:-- Taylor Washington: But every time she's buying online, she sees those colorful buttons tempting her.
--:-- Taylor Washington: And they're in more places every day.
--:-- Taylor Washington: Like this one time when she was getting her lips done, the tech asked if she wanted to use something called Cherry to pay.
--:-- Taylor Washington: That's a lender that finances lip fillers and plastic surgeries for up to $50,000.
--:-- Taylor Washington: Amelia said no thanks.
--:-- Taylor Washington: That's the scariest thing to me.
--:-- Taylor Washington: I was just like, if I didn't learn my lesson, oh my gosh, literally my lips would be on an installment payment.
--:-- Taylor Washington: Right.
--:-- Taylor Washington: There's just no place, I think, where you can not see Buy Now, Pay Later right now.
--:-- Taylor Washington: That's Terry Bradford with the Kansas City Fed again, the Woodward of our financial Woodward and Bernstein from earlier.
--:-- Taylor Washington: She's kept up with these kinds of services over the past few years, and she says that is the big change.
--:-- Taylor Washington: A few years ago, tons of Buy Now, Pay Later companies were trying to be everywhere.
--:-- Taylor Washington: Now they are everywhere.
--:-- Taylor Washington: Today, people use Buy Now, Pay Later for all kinds of things and not just luxuries.
--:-- Taylor Washington: When we first had this conversation, it was more about the nice-to-haves.
--:-- Taylor Washington: And now you're seeing buy now, pay later for things that you need.
--:-- Taylor Washington: Gasoline, groceries.
--:-- Taylor Washington: Terry says we also know more about who exactly is using these services.
--:-- Taylor Washington: The Fed's research has found that Black and Hispanic women are about twice as likely to use buy now, pay later than any other demographic group.
--:-- Taylor Washington: and the Consumer Financial Protection Bureau found that Buy Now Pay Later users also tend to have balances on things like student loans and car loans and personal loans.
--:-- Taylor Washington: Also, almost half of Buy Now Pay Later borrowers paid late last year, which could spell trouble because there are plans to factor Buy Now Pay Later into your credit score starting sometime this fall, which could land heavily on Gen Z consumers because the people most likely to use Buy Now, Pay Later are younger and Gen Z credit scores have been falling over the past year.
--:-- Taylor Washington: The demographic that's heavily using Buy Now, Pay Later is a younger demographic.
--:-- Taylor Washington: And without maybe some education about how using Buy Now, Pay Later can spiral on you, it could become a problem and it could become a lingering problem.
--:-- Taylor Washington: Now, Terry says Buy Now, Pay Later can still be a good deal if you are a prudent shopper, for example, and you need to buy groceries, but you don't have access to credit or cash.
--:-- Taylor Washington: Because there's no interest on these loans, they're generally better than something like a payday loan, but not if you're going on a shopping spree.
--:-- Taylor Washington: Which brings us one last time to our Gen Z shopper, Amelia.
--:-- Taylor Washington: After cutting out buy now, pay later, Amelia also cut out credit cards, but she couldn't quite give up the influencer life.
--:-- Taylor Washington: In fact, she now works for a company that helps influencers partner with brands, and she dabbles in some influencing herself.
--:-- Taylor Washington: Okay, guys, I'm getting ready to go to a pool party.
--:-- Taylor Washington: Which helps scratch that bikini-buying itch.
--:-- Taylor Washington: So I'm going to give you guys a mini haul and have you guys pick which one we like the best.
--:-- Taylor Washington: This time, without all the debt.
--:-- Taylor Washington: Bando-style top, which I really like, and it has little ruffles on it, which is so cute.
--:-- Taylor Washington: If you're looking for a guilt-free way to spend money, may we recommend Planet Money Plus?
--:-- Taylor Washington: Each monthly subscription means a steady source of funding we count on and we can use to plan our reporting.
--:-- Taylor Washington: It really helps, and we'd love for more of our funding to come directly from all of you.
--:-- Taylor Washington: Thanks, as always, to existing supporters who get bonus episodes and sponsor-free listening.
--:-- Taylor Washington: Sign up at plus.npr.org slash planetmoney, or click the link in the show notes.
--:-- Taylor Washington: This episode was originally produced by Emma Peasley, engineered by Josh Newell, and edited by Molly Messick.
--:-- Taylor Washington: Our update was reported by Vito Emanuel, produced by Willa Rubin, and edited by our executive producer, Alex Goldmark.
--:-- Taylor Washington: Special thanks to Taylor Washington. She is no longer producer with us.
--:-- Taylor Washington: She's currently in nursing school, about to graduate.
--:-- Taylor Washington: So if there are any hospitals out there looking for a smart, caring, trend-spotting healthcare professional, you know where to look.
--:-- Taylor Washington: I'm Alexi Horowitz-Gazi, and as she said three years ago...
--:-- Taylor Washington: I'm Taylor Washington.
--:-- Taylor Washington: This is NPR.
--:-- Taylor Washington: Thanks for listening.
