Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Drew and Jeff (00:12):
All right, so
here we are, once again, back in
the seats in front of ourmicrophones for another episode
of 2 Cents. And I am DrewThomas, this is Jeff Matevish.
And yeah, this is good stuff. Ienjoy having these conversations
with you, I really do. Because Ithink we find timely stuff. And
then instead of just having theconversation between the two of
us, we turn on the microphonesand you get to listen in. It's a
(00:36):
learning experience for us, too.
Yeah, it is, it is a learningexperience for us too. And I
think that, you know, you get tobe a fly on the wall, that's
always nice, you know. So, thelast time we got together, we
talked about credit cards versusdebit cards and the merits of
both and things like that. Andit got me thinking about who's
using credit cards, and howoften because I knew my parents
were constantly preaching at meto not use credit cards, because
(00:57):
they were so in debt with creditcard debt, that they were just
constantly telling me if youcan't afford it, don't buy it. I
don't know how things work foryou.
Jeff Matevish (01:05):
Mine were like
half and half. You had to build
credit, so you know, you get acar loan or you know, a small
personal loan. But you know, onthe other half, it was the same
thing, you know, if you can'tafford it, you know, don't buy
Drew Thomas (01:15):
Yeah, and we've
definitely talked about that,
Jeff Matevish (01:16):
Do you think that
just because there's more it.
too, where if you want to buy acar or a house or something at
some point in your life, youneed that credit, right, yeah,
you have to have a credithistory. And that means you got
to so borrow money, build thecredit and then stop. Yeah.
Build it and then stop. Exactly.
So, the article that I wasreading, this is a, it's an
(01:36):
article out of Financial Brandwebsite, says Gen Z credit card
use is outpacing Millennialsamid financial stress and
ballooning debt. So, we all knowthat lately, inflation has been
high. Things are, you know, alot more expensive than they
were even pre-pandemic, whetherit's lumber or food. Yeah, one
of which you need more oftenthan the other. But you know,
(01:58):
Gen Z was one of thosegenerations that said that they
wanted their debit cards, theyavoided credit, they, you know,
they didn't want to get intothat boat. However, Gen Z
relationship to credit cards haschanged according to research by
TransUnion, as well as analysisof its extensive credit
database. It says that thecompany compared Gen Z to
(02:19):
millennials when they were inthe same age range of about 22
to 24 years old, and adjusteddollar figures for credit use
and income for inflation. Andthe research found that as of
the end of 2023, which isbelieve it or not, almost a half
a year ago. 84% of Gen Z-ers whoare 22 to 24 years old, had
general purpose bank cardaccounts, 23 percentage points
(02:40):
more than the proportion ofmillennials at the end of 2023.
So, all things considered Geninformation about credit cards?
Z-ers are actually using creditcards more at the same age of 20
Drew and Jeff (02:48):
Yeah, maybe. I
don't know. I mean, but there's
to 24 than Millennials were.
good and bad information outthere. I mean, people know that
credit card debt can get yet.
Yeah. But I think it just comesdown to the fact that these are
younger people with lowersalaries generally, because
they're just entering theworkforce. And everything's so
(03:08):
much more expensive. I thinkthat it's possible that they
might just feel like they don'thave a choice but to use credit
cards. Yeah. Live on borrowedmoney. Yeah, yeah. So, so we
were looking at that, and then Istarted thinking, or we're
restarted talking, about thesebuy now pay later things that
are popping up all over theplace now. So, you know, that's
another thing that is relativelynew to the marketplace, this
(03:29):
idea that you can make equalpayments. I know that when I'm
on Amazon, just becauseeverybody uses Amazon it seems,
we keep picking on Amazon, butit's a good touch point that
everybody recognizes. Theypartner with a company called
Affirm. Yeah. And they offer alot of times, this idea where
you can, rather than paying thefull price upfront, you can make
(03:50):
equal payments. So, you lookedinto Affirm a little bit, right?
I did, yeah. So, what did you
Jeff Matevish (03:57):
I mean, a good
chunk of the products that
learn?
they're selling and that Affirmis being used on is 0% interest,
but there are products that youknow it, there is an interest
component, component. Yeah.
Okay. So, so it's, and that canbe high and yeah, it can be from
10% to 36%.
Drew Thomas (04:15):
Okay, so yeah, so
that that, that's potentially
very high. Yeah. Yeah. So, okay,so let's, so let's look at this.
So, a buy now pay later plan,essentially a short-term
financing, allowing consumers tomake purchases and pay for them
over time. So, it's like, to mein my, in my old brain, it's
like a reverse layaway. Youknow, back in the day, you went
to KMart, and you put your stuffon layaway in August and you got
(04:37):
it at Christmas after you paidit off. Okay, yeah. This is sort
of the reverse, you get yourproduct and then you pay it and
equal payments over X amount oftime. Yeah, yeah. And like you
said, sometimes there's nointerest, especially on the
lower value items. There's, youknow, so that that's an
advantage. I mean, it's like a0% interest payment. Yeah. And
so do they charge fees oranything like that, like are
(04:58):
there like hidden fees?
Jeff Matevish (05:00):
No, that was one
of the big selling points, you
know what you're going to payeach month at checkout pretty
much. Okay, so yeah, no hiddenfees, no late fees, but...
Drew Thomas (05:11):
Okay, so that mean,
so that's nice. Yeah, I mean, I
guess I'm assuming that, now,you say no late fees, but at the
same time, if you don't makeyour payment, like what happens?
Jeff Matevish (05:19):
Then they can
deny, you know, a future loan,
so, and it's going to hurt yourcredit score, I guess.
Drew Thomas (05:24):
Yeah, I mean, these
are technically loans. They are
right. I mean, I was reading inone of the articles that
essentially, there may be a softpull of your credit when you go
to sign up for one of thesethings. And they'll check the
basics like, are you runninglate on your payments? Or do you
have any, you know, missingpayments, things like that, but
they're not doing a hard pull ofyour credit, but with some of
(05:46):
the more expensive items theymay, at which point then your
credit score could take a slighthit because you're getting a
hard pull on your credit.
Jeff Matevish (05:53):
Yeah or through
longer terms. More than four
months, you know, they pull acredit report.
Drew Thomas (05:59):
Yeah, yeah. So,
this is interesting. So, this
comes from Investopedia, aSeptember 2022 report from the
Consumer Financial ProtectionBureau found that from 2019 to
2021, the number of buy now paylater loans in the United States
by the five lenders it surveyedgrew from $16.8 million to $180
(06:23):
million. Yeah, I mean, that'scrazy. I mean, it's, it says
it's branched down into areaslike travel, pet care,
groceries, gas. And most loansrange anywhere from $50 to
$1000. And I'm not trying todisparage anybody, but I can't
imagine a situation where Iwould have to do a buy now pay
later for $50. I mean, that tome, to me, I would rather set
(06:45):
$10 aside out of every pay,yeah, and wait two months and
get my $50 item than to take outa loan for it.
Jeff Matevish (06:52):
I guess it's a,
you know, how bad do you need,
is it a want or a need too?
Drew Thomas (06:55):
Well, that's true.
If it's for I mean, they'resaying groceries in here, right?
So, if it's groceries, and yougot to feed your kids, you know,
I mean, you can't, maybe youcan't wait, that's a good point.
It says here that however, itsays users of buy now pay later
services were far more likely intheir research to have bank
overdrafts, payday loans, andother high-interest financial
products, indicating that theyare more financially vulnerable
(07:17):
than non-users of buy now paylater financing. So,
essentially, what they'refinding is that these are people
that may already be in debt. Andnow you're taking out even more
debts without necessarily goingthrough the credit score process
and all this stuff. So, youcould, you could end up in over
your head pretty fast. Yeah,yeah. And I don't know, like,
for me, like, this still feelslike a credit card. But it's not
(07:40):
a credit card, I guess. I mean,it's somewhere between credit
cards and loans. And I mean...
Drew and Jeff (07:46):
It's like a
prepaid credit card. Like you
can't. Yeah, and the kind of noteven though Yeah, you're right.
Drew Thomas (07:51):
I don't know. They
just feel like, I mean it feels
like a good opportunity forpeople. And I think that it's
presented in a way that it couldbe a useful tool, but you've got
to be so disciplined aboutmaking sure you use it, right.
Because, is there any limit tohow many of these you can have?
Not that I saw? So I mean,that's the other that's the
thing, you know.
Jeff Matevish (08:09):
Actually I did
it, it was like $30,000, or
something like that. I mean, itwas, it was pretty high.
Drew Thomas (08:14):
Especially if
you're taking one out for $100
purchase.
Jeff Matevish (08:17):
Yeah. And if you
have, you know, you're
predisposed to, you know,overdrafting your, your bank
accounts and just have poorspending habits. Yeah, you can
get out of hand real quick.
Drew Thomas (08:27):
Yeah. Because you
could have you I mean, it's easy
to justify that to yourself,right, you're seeing you're,
you're seeing this product, andit comes up on the screen, it
says four equal payments of, Idon't know, $15. Right. I can, I
can manage that I can, I can do,it's attractive, I can do $15
for the next four months, right?
But you don't always rememberthat you've done this six times
already this month with otherthings. Yeah, yeah. So, now
(08:49):
instead of it being $15, it'sactually fifteen times six,
because you've done this withfour or five other products
before this one. So, andthere's, and there's...
Jeff Matevish (08:59):
And those could
all have, have varying rates
too, interest rates.
Drew Thomas (09:03):
Yeah so let's talk
about that. So, you said that
there are interest rates on someof these?
Jeff Matevish (09:07):
Yeah on some of
the products and they can get
pricey. I mean, it's 10% to 36%.
APR. Yeah. So, for this Affirmproduct, at least.
Drew Thomas (09:16):
Yeah, so 10%
doesn't sound so bad. But 36% is
more than a lot of credit cardsare. It sure is. Yeah, so you
have the advantage of being ableto get what you want now, and
possibly, depending on the valueof the merchandise, maybe you
get it interest free, maybe youdon't.
Jeff Matevish (09:33):
But even if there
is interest, the good thing is
that it is simple interest, it'snot compound interest. So,
you're not paying interest oninterest.
Drew Thomas (09:41):
Okay, well, that's
a good point. Yeah. Because
we're going to talk, and I'lllet the cat out of the bag just
a little bit here. We're goingto talk later this month in the
full episode of Bank Chats withthe CEO of AmeriServ, who talks
a lot about interest rates andtalks about how that can be
beneficial to you and compoundinterest when it comes to when
you're putting money into thebank. But also, you know how you
(10:04):
calculate interest when it comesto lending. So, you definitely
want to tune in for that onelater this month. But so some
disadvantages, certain downsideswith buy now pay later, it says
that by now pay later loansgenerally won't help you
establish or build good credit,because of the way they're
structured. I guess they're notreally hitting your credit
report. So, they don't reallyhelp you. And it also, so let's
Jeff Matevish (10:23):
And, who pays
you? How do you get paid? How do
talk about returns. It says, ifyou want to return an item you
bought using a buy now pay laterplan, it can get complicated
because it says you should getyour money back, but there can
be a delay until the merchantinforms the BNPL lender of the
refund. You may have to keepmaking payments in the meantime,
(10:44):
and if you don't, then thepayment might be marked as tardy
or missing resulting in addedfees, and a possible ding onto
your credit score. So, that,that also becomes problematic if
you're buying something that isrelatively low cost, like say,
maybe you're buying a, I don'tknow, a modem for your house,
like a Wi-Fi or a Wi-Fi router,probably going to be about $200,
(11:04):
right? And if you're using a buynow pay later plan and you buy
this thing, and you get it, andthen you use it for 15 or 16
days and it dies. And you got toreturn it. Well, you're paying
for, you're you're paying for abroken piece of equipment. And
you get your refund?
Drew Thomas (11:17):
Yeah that's a good
question. Does it come from the
so they can they can get allthat squared away.
merchant? Or does it come fromthe lender? Yeah.
Drew and Jeff (11:28):
I don't know, I
don't either. Make sure, make
sure you really want thatproduct and you're not going to
return it.
Drew Thomas (11:34):
Well yeah, but
sometimes you can't, yeah, I
mean, if it's broken, you're notgoing to keep it just so you can
keep making payments. Yeah. Imean, I'm sure you get, I'm sure
you're gonna get your money backfrom somebody, but the problem
becomes that delay then intrying to get everybody on the
same page.
Jeff Matevish (11:49):
Yeah, you're
gonna have that revolving door
of you know, the vendor says,oh, no, the lender has to pay.
And then the lender says, no,the vendor has to pay and, you
know, you don't know whereyou're gonna get your money.
Drew Thomas (11:59):
Yeah, I mean, you
can run into that with a lot of
things, you know, butdefinitely, when it comes to
this, it sounds like. Now, somesome advantages. So, I mean, it
says here that, on the flipside, these kinds of buy now pay
later plans can help teach teensabout paying monthly bills. If
you agree to purchase the jacketwith that kind of financing, you
could require your teenager topay you $25 every month until
(12:22):
it's paid off. So, it kind of,greases the wheels and teaches
them a little bit about havingto budget, right. Definitely.
Especially if you're on the Imean, if you're willing to be on
the hook for it as the parent,yeah. Right. And then you're
saying to your, to your son oryour daughter, hey, you know,
you're gonna pay me $25 a monthfor that video game that you
wanted. Yeah, that we did onthis buy now pay later plan.
(12:42):
Yeah. That being said, youprobably could do that anyway
without the buy now pay later.
Jeff Matevish (12:48):
Yeah, but you
can, you can show them, you
know, this is actually how itworks, I guess.
Drew Thomas (12:52):
Yeah. Yeah. But I
don't know, to me, it would be
if you as a parent are doingthat, then you, then maybe as
the parent, you just buy itoutright, and you, and you set
up your payment plan with yourteenager, you know, just between
you guys. It's a little safer.
Probably. Yeah. You don't forgetto make a payment. Yeah, yeah.
Dollar limits on buy now paylater loans, according to this,
it says that they vary fromprovider and retailer to
(13:13):
retailer. So, some, you may havea per purchase limit. Some you
may not.
Jeff Matevish (13:18):
It's not so based
on your credit history, for your
credit limit.
Drew Thomas (13:22):
Yeah no. And so
that goes back to what you were
saying about having, what$30,000 limits, I mean, some of
them might be that, some of themmight have no limits, some of
them might have lower limits.
Soj, I think the lesson to takefrom this conversation is, if
you're getting into one ofthese, buy now pay later
situations, make sure you'rereading the fine print and make
sure that you understand exactlywhat you're signing up for, what
(13:43):
kind of interest you may or maynot be paying, how often your
payments are due. Because I canimagine that most of these are
probably monthly, but maybe someof them aren't. Some of them
could be every two weeks. Yeah,you know, or something like
that. So, you want to make surethat you fully understand what
you're getting yourself involvedin before you sign on the dotted
line. Because it's, it soundsgreat upfront, you know, hey,
(14:04):
you know, this $100 item is only$15 for the next six months. Did
I do the math right on that?
Some, something like that. But$25 a month for the next four
months. How's that?
Jeff Matevish (14:16):
Smaller number
better than big number.
Drew Thomas (14:18):
Yeah. Are you,
you're just really busting my
Jeff Matevish (14:18):
Yeah, I see more
of these popping up in the
chops today aren't you? A smallnumber better than big number,
that is very true, thank you,Jeff. So, and especially if
you're, I guess the other thingtoo, getting back to the very
beginning of the conversation,especially if you're younger,
and you're doing this becauseyou know, maybe your, maybe your
future, probably. Yeah. Yeah.
salary isn't as high as youexpect it will become at one
(14:39):
point in the future. You know,if you're 22 years old, and
you're fresh out of college, andyou're making a lower value
salary, and yet you still wantthat new TV or something like
that. And again, sometimes it'snot even what you want. It's
what you need. Yeah, right ifyou're moving to a new city for
work and your parents aren'taround, you don't have family,
you don't have friends and youhave to furnish an apartment or
(15:02):
something. Sometimes you don'thave much choice but to go into
a little bit of debt. But yougot to be smart about it. Yeah.
You know, and whether that'susing a credit card or a
traditional bank loan, or one ofthese buy now pay later things.
You just got to be smart. Hey,you know, and really make sure
you understand what you'regetting yourself into, so.
Drew and Jeff (15:25):
I can only
imagine what is probably today.
Oh, yeah, I can possibly seebanks looking into stuff like
this, you know, different typesof lending products that might
be similar to this kind ofthing. Because these this, like,
(15:48):
the companies are like a firm,for example, they're not banks.
They're what they call fintechs.
They're financial technicalhybrids. Yeah. And so that's a
little bit of a different animalto like, kind of like Pay Pal, I
guess. Right. So, you know, alsobe aware that some of those
types of companies are not heldto the same standards as banks
when it comes to how your moneyis managed, and what kind of
(16:09):
rules they have to follow andthings like that, too. So,
that's, that's another thing tokeep in mind. But yeah, did we
cover everything? I think so.
All right. Well, then you knowwhat I think then maybe we just
wrap this up then. Okay. Allright. Hey, thanks, Jeff. Hey,
thanks Drew, bye.
Drew Thomas (16:31):
This podcast
focuses on having valuable
conversations on various topicsrelated to banking and financial
health. The podcast is groundedin having open conversations
with professionals and expertswith a goal of helping to take
some of the mystery out offinancial and related topics, as
learning about financialproducts and services can help
you make more informed financialdecisions. Please keep in mind
(16:51):
that the information containedwithin this podcast and any
resources available for downloadfrom our website or other
resources relating to BankChats, is not intended, and
should not be understood orinterpreted to be, financial
advice. The host, guests, andproduction staff of Bank Chat's
expressly recommend that youseek advice from a trusted
financial professional beforemaking financial decisions. The
(17:13):
host of Bank Chats is not anattorney, accountant, or
financial advisor, and theprogram is simply intended as
one source of information. Thepodcast is not a substitute for
financial professional who isaware of the facts and
circumstances of your individualsituation.
(17:38):
Thank you for listening. Pleasecheck out our full library of
episodes which can be found onthe ameriserv.com website. You
can also download or stream thepodcast from your favorite
podcast app.