PALM BEACH COUNTY, Fla. — This month, we've sought your thoughts on the challenges surrounding credit card debt, and we're making it a priority to address your questions.
WATCH BELOW: 'High inflation, high interest rates' has led to increase in BNPL, Ted Rossman says
During my research, a significant concern emerged regarding the increasing reliance on popular "buy now, pay later" (BNPL) services for financing purchases.
Klarna, a leading BNPL provider, reported a troubling rise in consumer credit losses, soaring to 17% in the first quarter compared to the same period last year. This trend of borrowers falling behind on their BNPL payments is becoming alarmingly widespread.
In fact, data from LendingTree shows that last month, a striking 41% of BNPL users admitted to making late payments within the past year, an increase from the previous year’s figures.
I reached out to consumers to understand their motivations for utilizing BNPL options. Here’s what some had to say:
“It’s just easy, you pay it and then it’s what, four different payments. Nothing big? Dresses and plane tickets I’ve done as well,” Demaris Christofano said.
“I like it. I use it a lot for concert tickets, clothes. I like it. I use it a lot,” said another consumer.
The appeal of BNPL lies in its promise of short-term, low-cost financing that seems to eliminate the traditional pitfalls of credit cards.
"High inflation, high interest rates, record amounts of credit card debt, record credit card rates, all of this has pushed people to buy now pay later as an alternative," Ted Rossman at Bankrate said.
WATCH BELOW: What consumers have to say about about BNPL
Rossman said about a third of Americans have already tried buy now pay later and it's growing in popularity— a new twist on the old layaway method of buying.
"It does not affect your credit, for now. Companies, like Affirm and Klarna, are working with the credit bureaus but it's not affecting your credit score right now," he said. "Lenders cannot see this information right now, unless you're so late you go to collection."
However, financial experts are raising important red flags regarding this growing trend. Rossman points out buy now pay later is still debt if consumers are not careful.
"Some of these providers have physical payments now, you can use your Affirm card or Klarna card at the gas station or the grocery store," Rossman said. "I understand there's a need for financing and the ability to spread out purchases; some of the daily stuff makes me nervous though like you can use Klarna on Doordash now."
Tune in to WPTV today from 4 p.m. to 6:30 p.m. for our coverage of navigating credit card debt as we seek solutions for you.
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