1 min read

TikToking into debt

TikTokers flashing off their #gifted haul are sending Gen Z shopaholics into a debt spiral using buy now, pay later (BNPL) schemes. Worst could be yet to come with mortgage brokers treating BNPL overuse as they do drinking and gambling addictions.
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May 18, 2022

As if viral dances and endless fashion hauls weren’t enough to contend with, TikTok users are increasingly falling into spiralling debt traps. 📉 According to a podcast by NPR’s Planet Money, a potent combination of influencers flashing the latest threads and buy now, pay later (BNPL) schemes has been catching out users. BNPL companies like Affirm (AFRM) and AfterPay, owned by Block (SQ), let customers split their goodies’ purchase price over multiple payments and are often interest free. But buyer beware: there may be traps. 🚫

While millennials look to MTV and genuine, ah-hem, influencers, like Jersey Shore’s DJ Pauly D, for advice on inflation and tanning the man-hood, TikTok gets in front of the very people most inclined to use BNPL: Gen Z. 🤳 Younger people with less ready cash are the largest group of users of BNPL options at checkout, and can be easily tempted by lower up-front prices, which can feel like free money

In New Zealand, more than half of Gen Z Kiwis have used BNPL services over the past three years. A survey by MBIE reported that 87% of buy now, pay later users used it to upgrade their wardrobe. 👟 The bigger concern is that almost 80% said they used BNPL because they ‘can’t afford the full price’. And around 20% of people surveyed miss payments. 

Because the displayed price of one payment can seem so cheap, shoppers like Amelia stack their purchases, which spirals costs higher. 🌪️ WARNING: This can become a big problem for shoppers wanting to borrow money to buy a house, where BNPL is viewed as a sin on par with drinking and gambling. ⚠️
TikTok has tried to play their part to look after users. Last year the company restricted the promotion of financial products, including the promotion of BNPL services. Perhaps brush up on savvy tips from a buy now, pay later shopaholic before you next shop ‘n’ scroll. 📱

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