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Growing Number of Consumers Reluctantly Embrace BNPL Services Amidst Financial Struggles

In a recent report, it was revealed that a growing number of consumers facing financial challenges are turning to buy now, pay later (BNPL) services as a financing alternative. The study conducted by J.D. Power found that 80% of consumers are aware of BNPL products, and 34% have used a BNPL program in the past 90 days. Among the biggest users of BNPL are 55% of Americans who feel financially overextended and 30% of customers with healthy financial situations.

A Helpful Yet Controversial Option

The survey also showed that 60% of Americans who are aware of BNPL believe that the option is helpful. However, 64% of them do not think that using BNPL has improved their financial situation. BNPL providers collaborate with retailers, allowing shoppers to split the cost of online purchases into interest-free installments at checkout. While this appeals to many, it is crucial to keep up with the payments, as missed payments can result in late fees and penalties.

Consumer Financial Satisfaction Declines Amid Economic Uncertainty

According to J.D. Power, recent ominous news about the debt ceiling crisis and the lingering presence of inflation have left customers feeling down about their finances. Customer satisfaction with financial conditions has declined to levels not seen since December 2022, despite steady financial health scores. Against this backdrop, consumers are becoming more open to alternative loan programs like BNPL, even though they believe it may not serve their best interests.

BNPL Providers Navigate Selectivity

While BNPL loans are generally easier to get approved for compared to traditional credit cards, signs are emerging that providers are becoming more selective in offering zero percent interest rate loans. A Wall Street Journal report highlights the struggle of lenders to turn a profit in the current economic environment. As a result, they are now choosing to approve only the group of consumers least likely to default. This shift comes as the BNPL space adjusts to more normalized conditions, moving away from the frothiness of the previous decade, which was fueled by government liquidity injections and artificially low interest rates.

Rising Credit Card and Personal Loan Balances

In the first quarter of 2023, credit card balances reached a staggering $917 billion, a significant 20% increase over the previous year, according to TransUnion. The average balance per consumer also surged by 14.4% year-over-year to $5,733. Additionally, unsecured personal loan balances rose by 26.3% to reach a new high of $225 billion. The average loan amount per borrower also climbed to $11,281 from $9,896 the previous year.

A Shifting Trend

Finty Co-Founder and Managing Partner, Andrew Boyd, noted that certain age groups are now shifting back to credit cards due to the perceived value of reward credit cards over BNPL products, which require credit checks and are interest-based. This shift is likely influenced by the changing financial landscape and individual preferences.

Consider Personal Loans for Debt Consolidation

If you find yourself struggling with debt, a personal loan could offer a solution. By consolidating your payments at a lower interest rate, you can save money each month. Credible provides a platform where you can find personalized interest rates without affecting your credit score.

As BNPL services gain popularity amidst the uncertainties of the economy, consumers must remain vigilant about their financial choices. While these services can be helpful, it’s essential to consider personal financial situations and make informed decisions to ensure a secure and stable financial future.

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