Over half of Gen Z consumers think BNPL encourages poor spending habits, according to Student Beans study
Here's what consumers are spending on, with the help of BNPL services
Gen Z consumers are using buy now, pay later services, but they are wary of the spending habits this option could form, according to a new study. (iStock)
Although one-third of Gen Z consumers utilize buy now, pay later (BNPL) services to help them when purchasing goods, the majority of them are wary of the service's potential pitfalls, according to new research provided by marketing tech company Student Beans.
BNPL providers like Afterpay, Klarna, Sezzle and Affirm allow consumers to break online purchases down into monthly installments. This payment option usually has zero interest on its plan, but can charge late fees if consumers fail to make on-time payments. The Student Beans study indicated that 34% of Gen Z Americans think BNPL services are great, but also that 52% aren’t sure about using it because they believe it encourages poor spending habits.
"Although Buy Now, Pay Later services are enticing, you must always ensure you’ll have the funds to pay off the borrowed money," Student Beans stated. "Plan in advance by using spending spreadsheets or budget calculator tools to get a clear understanding of your monthly finances as well as what’s feasible within your budget."
If you've incurred late fees or accumulated up debt as a result of using BNPL services, consolidating with a personal loan could give you just one payment to keep track of. Use an online marketplace like Credible to make sure you’re getting the best rate and lender for your needs.
RETAIL BUY NOW, PAY LATER TRANSACTIONS NOT REPLACING CREDIT CARDS, STUDY SHOWS
Older generations more wary of BNPL
Parents of Gen Z consumers are more likely to be against BNPL services, with 60% of survey respondents saying they can be risky since it encourages young people to buy more than they can afford. Grandparents were the most unfavorable toward the service, with 67% saying it is too risky.
For those that did use BNPL services, Gen Z was more likely to use to buy clothes, and Gen X and Baby Boomers were more likely to purchase more expensive tech items.
"On average, young Americans take $103.16 from budgets intended for a monthly food shop to make clothing purchases only to be worn for Instagram and TikTok," the survey stated.
If you are trying to pay down BNPL installments, taking out a personal loan could help you to consolidate debt you may have. With Credible, for instance, you can compare personal loan rates from multiple lenders without affecting your credit score.
BUY NOW, PAY LATER LOANS TO BE FORMALLY INCLUDED IN EQUIFAX CREDIT REPORTS
BNPL can help young Americans build their credit scores
In December, Equifax became the first of the three credit bureaus to standardize a process that includes BNPL credit payments when calculating credit scores. Now, consumers who use BNPL responsibly can use it to boost their score and credit history.
"Aside from helping with making purchasing decisions, Buy Now, Pay Later services can be a great way of helping young people to build their credit scores," Student Beans Editor Lewis Potton said. "If you can showcase that you’re able to commit to monthly payments on time, at the amount of what has been promised to pay, then this is an indicator to financial savers that you’re able to manage your money sensibly. Be warned though, late payments or no payments at all can cause serious harm to not only your credit score but could also lead to more serious issues such as debt."
If you have accumulated debt and are looking to pay it down, consider using a low-interest rate personal loan. Use an online marketplace like Credible to speak to a loan expert, and to make sure you’re getting the best rate and lender for your needs.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.