0:12

All right, so

0:12

here we are, once again, back in

0:15

the seats in front of our

0:15

microphones for another episode

0:18

of 2 Cents. And I am Drew

0:18

Thomas, this is Jeff Matevish.

0:21

And yeah, this is good stuff. I

0:21

enjoy having these conversations

0:26

with you, I really do. Because I

0:26

think we find timely stuff. And

0:29

then instead of just having the

0:29

conversation between the two of

0:32

us, we turn on the microphones

0:32

and you get to listen in. It's a

0:36

learning experience for us, too.

0:36

Yeah, it is, it is a learning

0:39

experience for us too. And I

0:39

think that, you know, you get to

0:42

be a fly on the wall, that's

0:42

always nice, you know. So, the

0:45

last time we got together, we talked about credit cards versus debit cards and the merits of

0:47

both and things like that. And

0:50

it got me thinking about who's

0:50

using credit cards, and how

0:53

often because I knew my parents

0:53

were constantly preaching at me

0:57

to not use credit cards, because

0:57

they were so in debt with credit

0:59

card debt, that they were just

0:59

constantly telling me if you

1:02

can't afford it, don't buy it. I

1:02

don't know how things work for

1:04

you.

1:05

Mine were like

1:05

half and half. You had to build

1:07

credit, so you know, you get a

1:07

car loan or you know, a small

1:10

personal loan. But you know, on

1:10

the other half, it was the same

1:14

thing, you know, if you can't

1:14

afford it, you know, don't buy

1:15

Yeah, and we've

1:15

definitely talked about that,

1:16

Do you think that

1:16

just because there's more

1:16

it. too, where if you want to buy a

1:18

car or a house or something at

1:22

some point in your life, you

1:22

need that credit, right, yeah,

1:26

you have to have a credit

1:26

history. And that means you got

1:29

to so borrow money, build the

1:29

credit and then stop. Yeah.

1:33

Build it and then stop. Exactly.

1:33

So, the article that I was

1:36

reading, this is a, it's an

1:36

article out of Financial Brand

1:40

website, says Gen Z credit card

1:40

use is outpacing Millennials

1:43

amid financial stress and

1:43

ballooning debt. So, we all know

1:47

that lately, inflation has been

1:47

high. Things are, you know, a

1:51

lot more expensive than they

1:51

were even pre-pandemic, whether

1:54

it's lumber or food. Yeah, one

1:54

of which you need more often

1:58

than the other. But you know,

1:58

Gen Z was one of those

2:01

generations that said that they

2:01

wanted their debit cards, they

2:05

avoided credit, they, you know,

2:05

they didn't want to get into

2:08

that boat. However, Gen Z

2:08

relationship to credit cards has

2:12

changed according to research by

2:12

TransUnion, as well as analysis

2:16

of its extensive credit

2:16

database. It says that the

2:19

company compared Gen Z to

2:19

millennials when they were in

2:22

the same age range of about 22

2:22

to 24 years old, and adjusted

2:26

dollar figures for credit use

2:26

and income for inflation. And

2:29

the research found that as of

2:29

the end of 2023, which is

2:33

believe it or not, almost a half

2:33

a year ago. 84% of Gen Z-ers who

2:37

are 22 to 24 years old, had

2:37

general purpose bank card

2:40

accounts, 23 percentage points

2:40

more than the proportion of

2:44

millennials at the end of 2023.

2:44

So, all things considered Gen

2:47

information about credit cards? Z-ers are actually using credit

2:47

cards more at the same age of 20

2:48

Yeah, maybe. I

2:48

don't know. I mean, but there's

2:51

to 24 than Millennials were. good and bad information out

2:54

there. I mean, people know that

3:02

credit card debt can get yet.

3:02

Yeah. But I think it just comes

3:04

down to the fact that these are

3:04

younger people with lower

3:06

salaries generally, because they're just entering the workforce. And everything's so

3:08

much more expensive. I think

3:12

that it's possible that they

3:12

might just feel like they don't

3:14

have a choice but to use credit

3:14

cards. Yeah. Live on borrowed

3:17

money. Yeah, yeah. So, so we

3:17

were looking at that, and then I

3:20

started thinking, or we're

3:20

restarted talking, about these

3:23

buy now pay later things that

3:23

are popping up all over the

3:26

place now. So, you know, that's

3:26

another thing that is relatively

3:29

new to the marketplace, this

3:29

idea that you can make equal

3:32

payments. I know that when I'm

3:32

on Amazon, just because

3:36

everybody uses Amazon it seems,

3:36

we keep picking on Amazon, but

3:41

it's a good touch point that

3:41

everybody recognizes. They

3:44

partner with a company called

3:44

Affirm. Yeah. And they offer a

3:47

lot of times, this idea where

3:47

you can, rather than paying the

3:50

full price upfront, you can make

3:50

equal payments. So, you looked

3:54

into Affirm a little bit, right?

3:54

I did, yeah. So, what did you

3:57

I mean, a good

3:57

chunk of the products that

3:57

learn? they're selling and that Affirm

4:00

is being used on is 0% interest,

4:05

but there are products that you

4:05

know it, there is an interest

4:09

component, component. Yeah.

4:09

Okay. So, so it's, and that can

4:13

be high and yeah, it can be from

4:13

10% to 36%.

4:15

Okay, so yeah, so

4:15

that that, that's potentially

4:18

very high. Yeah. Yeah. So, okay,

4:18

so let's, so let's look at this.

4:21

So, a buy now pay later plan,

4:21

essentially a short-term

4:24

financing, allowing consumers to

4:24

make purchases and pay for them

4:27

over time. So, it's like, to me

4:27

in my, in my old brain, it's

4:32

like a reverse layaway. You

4:32

know, back in the day, you went

4:34

to KMart, and you put your stuff

4:34

on layaway in August and you got

4:37

it at Christmas after you paid

4:37

it off. Okay, yeah. This is sort

4:40

of the reverse, you get your

4:40

product and then you pay it and

4:42

equal payments over X amount of

4:42

time. Yeah, yeah. And like you

4:46

said, sometimes there's no

4:46

interest, especially on the

4:49

lower value items. There's, you

4:49

know, so that that's an

4:52

advantage. I mean, it's like a

4:52

0% interest payment. Yeah. And

4:56

so do they charge fees or

4:56

anything like that, like are

4:58

there like hidden fees?

5:00

No, that was one

5:00

of the big selling points, you

5:03

know what you're going to pay

5:03

each month at checkout pretty

5:07

much. Okay, so yeah, no hidden

5:07

fees, no late fees, but...

5:11

Okay, so that mean, so that's nice. Yeah, I mean, I guess I'm assuming that, now,

5:12

you say no late fees, but at the

5:15

same time, if you don't make

5:15

your payment, like what happens?

5:19

Then they can

5:19

deny, you know, a future loan,

5:22

so, and it's going to hurt your credit score, I guess.

5:24

Yeah, I mean, these

5:24

are technically loans. They are

5:27

right. I mean, I was reading in

5:27

one of the articles that

5:30

essentially, there may be a soft

5:30

pull of your credit when you go

5:34

to sign up for one of these

5:34

things. And they'll check the

5:37

basics like, are you running

5:37

late on your payments? Or do you

5:41

have any, you know, missing

5:41

payments, things like that, but

5:43

they're not doing a hard pull of

5:43

your credit, but with some of

5:46

the more expensive items they

5:46

may, at which point then your

5:49

credit score could take a slight

5:49

hit because you're getting a

5:52

hard pull on your credit.

5:53

Yeah or through

5:53

longer terms. More than four

5:56

months, you know, they pull a

5:56

credit report.

5:59

Yeah, yeah. So, this is interesting. So, this comes from Investopedia, a

5:59

September 2022 report from the Consumer Financial Protection

6:01

Bureau found that from 2019 to

6:07

2021, the number of buy now pay

6:07

later loans in the United States

6:17

by the five lenders it surveyed

6:17

grew from $16.8 million to $180

6:23

million. Yeah, I mean, that's

6:23

crazy. I mean, it's, it says

6:27

it's branched down into areas

6:27

like travel, pet care,

6:29

groceries, gas. And most loans

6:29

range anywhere from $50 to

6:34

$1000. And I'm not trying to

6:34

disparage anybody, but I can't

6:39

imagine a situation where I

6:39

would have to do a buy now pay

6:42

later for $50. I mean, that to

6:42

me, to me, I would rather set

6:45

$10 aside out of every pay,

6:45

yeah, and wait two months and

6:49

get my $50 item than to take out

6:49

a loan for it.

6:52

I guess it's a, you know, how bad do you need, is it a want or a need too?

6:55

Well, that's true. If it's for I mean, they're saying groceries in here, right?

6:57

So, if it's groceries, and you

7:00

got to feed your kids, you know,

7:00

I mean, you can't, maybe you

7:03

can't wait, that's a good point.

7:03

It says here that however, it

7:06

says users of buy now pay later

7:06

services were far more likely in

7:10

their research to have bank

7:10

overdrafts, payday loans, and

7:14

other high-interest financial

7:14

products, indicating that they

7:17

are more financially vulnerable

7:17

than non-users of buy now pay

7:21

later financing. So,

7:21

essentially, what they're

7:23

finding is that these are people

7:23

that may already be in debt. And

7:27

now you're taking out even more

7:27

debts without necessarily going

7:30

through the credit score process

7:30

and all this stuff. So, you

7:33

could, you could end up in over

7:33

your head pretty fast. Yeah,

7:36

yeah. And I don't know, like,

7:36

for me, like, this still feels

7:40

like a credit card. But it's not

7:40

a credit card, I guess. I mean,

7:43

it's somewhere between credit

7:43

cards and loans. And I mean...

7:46

It's like a prepaid credit card. Like you can't. Yeah, and the kind of not

7:48

even though Yeah, you're right.

7:51

I don't know. They

7:51

just feel like, I mean it feels

7:54

like a good opportunity for

7:54

people. And I think that it's

7:56

presented in a way that it could

7:56

be a useful tool, but you've got

8:00

to be so disciplined about

8:00

making sure you use it, right.

8:02

Because, is there any limit to

8:02

how many of these you can have?

8:05

Not that I saw? So I mean,

8:05

that's the other that's the

8:08

thing, you know.

8:09

Actually I did

8:09

it, it was like $30,000, or

8:12

something like that. I mean, it

8:12

was, it was pretty high.

8:14

Especially if

8:14

you're taking one out for $100

8:17

purchase.

8:17

Yeah. And if you have, you know, you're predisposed to, you know,

8:19

overdrafting your, your bank

8:22

accounts and just have poor

8:22

spending habits. Yeah, you can

8:25

get out of hand real quick.

8:27

Yeah. Because you

8:27

could have you I mean, it's easy

8:29

to justify that to yourself, right, you're seeing you're, you're seeing this product, and

8:31

it comes up on the screen, it

8:33

says four equal payments of, I

8:33

don't know, $15. Right. I can, I

8:38

can manage that I can, I can do,

8:38

it's attractive, I can do $15

8:42

for the next four months, right?

8:42

But you don't always remember

8:45

that you've done this six times

8:45

already this month with other

8:49

things. Yeah, yeah. So, now

8:49

instead of it being $15, it's

8:52

actually fifteen times six,

8:52

because you've done this with

8:56

four or five other products

8:56

before this one. So, and

8:59

there's, and there's...

8:59

And those could

8:59

all have, have varying rates

9:02

too, interest rates.

9:03

Yeah so let's talk

9:03

about that. So, you said that

9:06

there are interest rates on some of these?

9:07

Yeah on some of

9:07

the products and they can get

9:11

pricey. I mean, it's 10% to 36%.

9:11

APR. Yeah. So, for this Affirm

9:16

product, at least.

9:16

Yeah, so 10%

9:16

doesn't sound so bad. But 36% is

9:20

more than a lot of credit cards

9:20

are. It sure is. Yeah, so you

9:23

have the advantage of being able

9:23

to get what you want now, and

9:27

possibly, depending on the value

9:27

of the merchandise, maybe you

9:31

get it interest free, maybe you don't.

9:33

But even if there

9:33

is interest, the good thing is

9:36

that it is simple interest, it's

9:36

not compound interest. So,

9:39

you're not paying interest on interest.

9:41

Okay, well, that's

9:41

a good point. Yeah. Because

9:43

we're going to talk, and I'll

9:43

let the cat out of the bag just

9:47

a little bit here. We're going

9:47

to talk later this month in the

9:50

full episode of Bank Chats with

9:50

the CEO of AmeriServ, who talks

9:54

a lot about interest rates and

9:54

talks about how that can be

9:57

beneficial to you and compound

9:57

interest when it comes to when

10:00

you're putting money into the

10:00

bank. But also, you know how you

10:04

calculate interest when it comes

10:04

to lending. So, you definitely

10:07

want to tune in for that one

10:07

later this month. But so some

10:10

disadvantages, certain downsides

10:10

with buy now pay later, it says

10:14

that by now pay later loans

10:14

generally won't help you

10:17

establish or build good credit,

10:17

because of the way they're

10:20

structured. I guess they're not

10:20

really hitting your credit

10:23

report. So, they don't really

10:23

help you. And it also, so let's

10:23

And, who pays

10:23

you? How do you get paid? How do

10:27

talk about returns. It says, if

10:27

you want to return an item you

10:30

bought using a buy now pay later

10:30

plan, it can get complicated

10:34

because it says you should get

10:34

your money back, but there can

10:37

be a delay until the merchant

10:37

informs the BNPL lender of the

10:40

refund. You may have to keep

10:40

making payments in the meantime,

10:44

and if you don't, then the

10:44

payment might be marked as tardy

10:47

or missing resulting in added

10:47

fees, and a possible ding onto

10:50

your credit score. So, that,

10:50

that also becomes problematic if

10:54

you're buying something that is

10:54

relatively low cost, like say,

10:57

maybe you're buying a, I don't

10:57

know, a modem for your house,

11:00

like a Wi-Fi or a Wi-Fi router,

11:00

probably going to be about $200,

11:04

right? And if you're using a buy

11:04

now pay later plan and you buy

11:08

this thing, and you get it, and

11:08

then you use it for 15 or 16

11:11

days and it dies. And you got to

11:11

return it. Well, you're paying

11:14

for, you're you're paying for a

11:14

broken piece of equipment. And

11:16

you get your refund?

11:17

Yeah that's a good

11:17

question. Does it come from the

11:18

so they can they can get all

11:18

that squared away.

11:25

merchant? Or does it come from

11:25

the lender? Yeah.

11:28

I don't know, I

11:28

don't either. Make sure, make

11:31

sure you really want that

11:31

product and you're not going to

11:33

return it.

11:34

Well yeah, but sometimes you can't, yeah, I mean, if it's broken, you're not

11:36

going to keep it just so you can

11:38

keep making payments. Yeah. I

11:38

mean, I'm sure you get, I'm sure

11:42

you're gonna get your money back

11:42

from somebody, but the problem

11:44

becomes that delay then in

11:44

trying to get everybody on the

11:48

same page.

11:49

Yeah, you're

11:49

gonna have that revolving door

11:52

of you know, the vendor says,

11:52

oh, no, the lender has to pay.

11:55

And then the lender says, no,

11:55

the vendor has to pay and, you

11:58

know, you don't know where you're gonna get your money.

11:59

Yeah, I mean, you

11:59

can run into that with a lot of

12:02

things, you know, but

12:02

definitely, when it comes to

12:04

this, it sounds like. Now, some

12:04

some advantages. So, I mean, it

12:08

says here that, on the flip

12:08

side, these kinds of buy now pay

12:11

later plans can help teach teens

12:11

about paying monthly bills. If

12:15

you agree to purchase the jacket

12:15

with that kind of financing, you

12:18

could require your teenager to

12:18

pay you $25 every month until

12:22

it's paid off. So, it kind of,

12:22

greases the wheels and teaches

12:26

them a little bit about having

12:26

to budget, right. Definitely.

12:29

Especially if you're on the I mean, if you're willing to be on the hook for it as the parent,

12:31

yeah. Right. And then you're

12:33

saying to your, to your son or

12:33

your daughter, hey, you know,

12:36

you're gonna pay me $25 a month

12:36

for that video game that you

12:39

wanted. Yeah, that we did on

12:39

this buy now pay later plan.

12:42

Yeah. That being said, you

12:42

probably could do that anyway

12:46

without the buy now pay later.

12:48

Yeah, but you can, you can show them, you know, this is actually how it

12:50

works, I guess.

12:52

Yeah. Yeah. But I

12:52

don't know, to me, it would be

12:55

if you as a parent are doing

12:55

that, then you, then maybe as

12:58

the parent, you just buy it

12:58

outright, and you, and you set

13:00

up your payment plan with your

13:00

teenager, you know, just between

13:03

you guys. It's a little safer.

13:03

Probably. Yeah. You don't forget

13:07

to make a payment. Yeah, yeah.

13:07

Dollar limits on buy now pay

13:10

later loans, according to this,

13:10

it says that they vary from

13:13

provider and retailer to

13:13

retailer. So, some, you may have

13:16

a per purchase limit. Some you may not.

13:18

It's not so based

13:18

on your credit history, for your

13:21

credit limit.

13:22

Yeah no. And so

13:22

that goes back to what you were

13:25

saying about having, what

13:25

$30,000 limits, I mean, some of

13:28

them might be that, some of them

13:28

might have no limits, some of

13:31

them might have lower limits.

13:31

Soj, I think the lesson to take

13:33

from this conversation is, if

13:33

you're getting into one of

13:36

these, buy now pay later

13:36

situations, make sure you're

13:40

reading the fine print and make

13:40

sure that you understand exactly

13:43

what you're signing up for, what

13:43

kind of interest you may or may

13:46

not be paying, how often your

13:46

payments are due. Because I can

13:50

imagine that most of these are

13:50

probably monthly, but maybe some

13:53

of them aren't. Some of them

13:53

could be every two weeks. Yeah,

13:55

you know, or something like

13:55

that. So, you want to make sure

13:58

that you fully understand what

13:58

you're getting yourself involved

14:00

in before you sign on the dotted

14:00

line. Because it's, it sounds

14:04

great upfront, you know, hey,

14:04

you know, this $100 item is only

14:08

$15 for the next six months. Did

14:08

I do the math right on that?

14:11

Some, something like that. But

14:11

$25 a month for the next four

14:15

months. How's that?

14:16

Smaller number

14:16

better than big number.

14:18

Yeah. Are you,

14:18

you're just really busting my

14:18

Yeah, I see more

14:18

of these popping up in the

14:20

chops today aren't you? A small

14:20

number better than big number,

14:23

that is very true, thank you,

14:23

Jeff. So, and especially if

14:26

you're, I guess the other thing

14:26

too, getting back to the very

14:30

beginning of the conversation,

14:30

especially if you're younger,

14:33

and you're doing this because

14:33

you know, maybe your, maybe your

14:34

future, probably. Yeah. Yeah.

14:36

salary isn't as high as you

14:36

expect it will become at one

14:39

point in the future. You know,

14:39

if you're 22 years old, and

14:42

you're fresh out of college, and

14:42

you're making a lower value

14:46

salary, and yet you still want

14:46

that new TV or something like

14:49

that. And again, sometimes it's

14:49

not even what you want. It's

14:52

what you need. Yeah, right if

14:52

you're moving to a new city for

14:56

work and your parents aren't

14:56

around, you don't have family,

14:59

you don't have friends and you

14:59

have to furnish an apartment or

15:02

something. Sometimes you don't

15:02

have much choice but to go into

15:05

a little bit of debt. But you

15:05

got to be smart about it. Yeah.

15:09

You know, and whether that's

15:09

using a credit card or a

15:12

traditional bank loan, or one of

15:12

these buy now pay later things.

15:15

You just got to be smart. Hey,

15:15

you know, and really make sure

15:18

you understand what you're

15:18

getting yourself into, so.

15:25

I can only

15:25

imagine what is probably today.

15:34

Oh, yeah, I can possibly see

15:34

banks looking into stuff like

15:42

this, you know, different types

15:42

of lending products that might

15:45

be similar to this kind of

15:45

thing. Because these this, like,

15:48

the companies are like a firm,

15:48

for example, they're not banks.

15:51

They're what they call fintechs.

15:51

They're financial technical

15:54

hybrids. Yeah. And so that's a

15:54

little bit of a different animal

15:57

to like, kind of like Pay Pal, I

15:57

guess. Right. So, you know, also

16:02

be aware that some of those

16:02

types of companies are not held

16:06

to the same standards as banks

16:06

when it comes to how your money

16:09

is managed, and what kind of

16:09

rules they have to follow and

16:12

things like that, too. So,

16:12

that's, that's another thing to

16:14

keep in mind. But yeah, did we

16:14

cover everything? I think so.

16:18

All right. Well, then you know

16:18

what I think then maybe we just

16:20

wrap this up then. Okay. All

16:20

right. Hey, thanks, Jeff. Hey,

16:23

thanks Drew, bye.

16:31

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