The bigger problem with BNPL, in my view, is that a lot of people are not able to understand the concept of credit. I knew people in my hometown who got a credit card, and their reaction to having a $3k credit limit was the exact same as if they had gotten $3k deposited into their bank account. I’m honestly not sure whether they understood that they didn’t just randomly get given $3k. I saw this happen multiple times. But it sounds very patronizing to say the “there’s a lot of poor people who don’t understand credit, so we need to prevent them from having access to any so they don’t get the chance to screw themselves”, so I understand why no one does.
Not that that will happen because we will find another job before this.
Like my passive income from the rental properties that I party own/invest in more than cover my own rent (or mortgage) and food costs.
So If I am years of missed paychecks away from being unhoused and unfed, what does that make me?
To me the justifiability of these two imperatives seem to be reversed. But to the extent that "protecting stupid people from loan sharks" is unjustified, we also think that we should "protect weak people from robbers and bandits", and protect people from frauds.
I meant the opposite.
It's not that "the government" knows better than you how you should live your life, but it sets the ground rules that we all must adhere to in order to participate in society.
And for better or worse, because our society dictates that we won't simply leave crash victims who weren't wearing a seat belt to die in the median of the highway (whether they want to be left or not) we mandate that everyone wears a seat belt.
Do some googling about what is a "food desert", plenty of lower income people in the USA live somewhere that the grocery store options and fresh, nutritious ingredient shopping options are VERY poor. Or a costly distance away to drive on a regular basis.
I am not saying this excuses ordering $25 burritos on doordash or uber eats but it is an influencing factor.
Cooking — as in being able to make any set of common ingredients tasty, quickly, with few dishes to wash, and without looking up recipes each time — is the skill you need before you can “unlock” supermarkets. If I was still 19 and a new supermarket showed up, I would know f— all to do except browse the frozen section.
Super valuable houses where nobody ever cooked. He said the only thing he’d ever be called to service was the microwave and the fridge.
But 10 years in, gotta refresh the house!
Personally, I think the government should be investigating ways to raise income levels for the poorest. I don’t know what form this should take - UBI? negative income tax? - but fix that and the rest would follow for many people.
This isn't an attempt at blaming, just a statement that there are significant hurdles.
And just as certainly being poor can be a result of bad choices and other things. Denying that either is possible is a recipe for disaster.
What we should do is work on the things that will work for those who need help and help them improve their skills or provide them a structured environment where are those skills are not necessary.
The few percent of the population that suffer insecurity do so as a symptom of other complex causes. Children of addicts and mentally unstable will struggle to get dinner, even if there is a food pantry down the block. A homeless schizophrenic living out of a backpack wont always have food with them.
For reasons like this, there is a floor to the practical floor to the elimination of hunger.
Also, if you havent, I would recommend reading through a food insecurity survey if you haven't. The definition is broader than most realize.
If you look at malnutrition rates in the US, I think you get a much clearer picture.
Speaking as an immigrant, from what I've seen in US, it is mostly a cultural issue, not lack of time or ingredient availability.
UBI is a good idea but orthogonal to all this.
Food deserts only exist where the negative cost of being burglarized has managed to exceed the large income of fulfilling humanity's third most basic need besides air and water.
I think the underlying reason is that being patronised is very antagonising, and the poor generally outnumber the rich, who must ultimately depend on them in a variety of ways.
But if people want to have a serious conversation, it’s intellectually dishonest to steer around topics in that way. That’s how you end up with clueless policies.
It’s not just that people don’t understand debt, it’s that the vast majority of people live in precarious situations which make debt a temptation. A little debt to grease transactions and buy assets is good, a lot of debt is a burning crises.
There are places where they didn't own anything. Decades ago I read that at some point each feudal lord coined his own currency for his peasants. If a peasant escaped, he wouldn't have means to take anything with him.
Same in Russia. A couple centuries ago, serfs came with the land. They could be liberated if the owner decided it. However, being a free man is quite difficult without a job.
Serfdom ended in 1861.
A modern echo of this: Several times in the gloomy AM hours, I have worried what might happen if the current US administration tries to impose capital controls [0] like China. You might flee to Canada, only to find out that most/all of your life savings are forfeit to the tender mercies of the US government.
[0] https://www.reuters.com/markets/us/investors-could-exit-tari...
If all loans were required to be non-recourse they’d suddenly have to be reasonable; anyone suffering too much under them would walk away leaving the collateral.
This isn’t even a death-knell for credit cards; it’d just turn them all to secured ones. But it would be deadly to allowing people to overspend and overextend.
One of the defining traits of medieval Europe was that peasants were forced into serfdom and were granted the privilege to work the land.
More primitive societies banned usury because the concept of interest was seen as unfair. This held them back from investing or speculating on the future and kept them very poor.
However, OP didn't talk about owning land but rather about "permanent land rights", which usually means the right to use land. That is, it would still be owned by the feudal, who might be able to sell it to another feudal, but the peasants that lived on it and farmed it were necessarily part of the deal and couldn't be just removed from the land at a whim. That was not an uncommon arrangement even in places that had serfdom.
Is it that they COULDN'T be, or is it that there was no reason to relocate them?
Serfdom might not have been universal, but it was extremely common and the predominant system in large parts of medieval Europe.
In Eastern Europe - and especially in Russia - serfdom began as a similar arrangement, but eventually evolved into full-fledged slavery where people could be bought and sold in and of themselves at a whim, while the original label remained for propriety reasons - basically people wanted to own slaves but didn't want to be called "slaveholders". So, a bit like "democratic people's republics" of whatever today. However, even if you take the label at face value, that arrangement still does not describe most places with serfdom.
OTOH, the article literally says that "data [shows] that those with lower incomes, lower education, and worse credit (redundancies here) are more likely to use BNPL."
Most consumer protection laws are somewhat patronizing, but since you can't be an expert in everything, we need them.
The article doesn't state they target uneducated people, it states that they use it more which are subtle but key differences. Furthermore "poor people who don’t understand credit" is not the same category as "lower incomes, lower education, and worse credit (redundancies here)". Even if we assume they are the same group of people (by making an equivalence between understanding of credit and general education/income/credit which we know is not a great assumption) the statements are different anyway.
The article is talking about an observed statistic, BNPL seems to be more prevalent in lower income, lower education and worse credit populations (we actually have really poor data on private credit so this should be taken with a grain of salt). The commenter however is making the claim that this is because they have a bad understanding of credit, and also implicitily that BNPL is bad and a bad use of credit.
These are therefore different as we can easily see for instance that a probable cause could for example be that people with no savings are more likely to borrow to cover spending in-between paychecks for example, or when emergency expenses change their cash-flow. This would not however fit with the commenters viewpoint, and is actually a good use of credit.
If you could declare bankruptcy (Hey. I just wanted you to know that you can't just say the word "bankruptcy" and expect anything to happen.) the moment your credit card bill arrived, no bank would extend you credit beyond what you specifically had on deposit with them to secure it (just like home mortgages are secured by the home).
The thing is, a lot of poor people live like that every day. I have some friends who are a single car problem away from being financially destitute because of the death spiral that can come from being poor- your car that you drive to work breaks down and you don't have the money to fix it. You lose your job because you can't get to work, and you can't get another job because you don't have transportation. Public transit is non existent in most of the US. You can get another car, but it's a junker at an insane interest rate and that's another expense you don't need. So yeah in that headspace I can understand feeling like financing a burrito could make sense. If you're already not thinking straight and you're tempted by a simple pleasure that feels like the one thing you can control in life and you know you're going to have the bank balance tomorrow, I can see it.
People wanting stuff like this doesn't mean it's rational to use or moral to offer. It's a symptom of a society that is fundamentally broken, that is designed to keep people on the razor's edge of their current economic status and in constant fear of losing what little they have.
*If you're curious how this happens, I take an expensive medication for a chronic illness and my insurance randomly changed how they pay for it without informing me before I got hit with a $2000 bill
During the 2008 recession, I remember a woman who called in to one of the financial advice radio shows (Dave Ramsey?). She was talking about how her husband has been laid off and they were eating beans, tortillas and rice, and how i simply thought, "so you're eating....mexican food?"
That said, it's crazy how a burrito is $12 now and a two taco, beans/rice dinner at the generic Mexican restaurants in town is $16. This is peasant food that should be dirt cheap. Even the gray-market facebook food sellers want $12.
Beans, rice, and burritos are still relatively cheap. Labor is not.
> This is peasant food that should be dirt cheap.
Make it ourselves and it is.
It's also a byproduct of minimum wage, the time spent on making the burrito, prepping the kitchen, cleaning up, processing the order, doing the accounts, etc. all adds up meaning a single meal has a minimum cost directly proportional to minimum wage.
Though don't get me wrong, minimum wage is an overall good imo.
However if we had universal basic income instead, and thus could scrap minimum wage, you might see the price of a burrito drop.
...at the expense of massive fiscal spending needed to fund the UBI in the first place.
Also, in my personal experience, a new job often brings various costs (food, clothes, transportation, relocation, etc) long before the paychecks show up. There was a time in the early 2000s where being able to klarna a tank or two of gas until my paycheck landed would have been extremely useful to me
Credit is legitimate if you use it for an investment (or expense) which will get you higher returns than the interest payments. Not for luxury goods.
Whether a delivery burrito is a luxury good or a basic necessity is apparently up for debate.
Now our world is all about maximum profit extraction. Interest.
How about no more public education, you get a loan for it. What, that's what your taxes pay for? Well, it's not enough, too bad. The masters say that you can't possibly pay enough tax to give your child an education. But they'll give you a loan for it, with interest.
Coming very soon to a reality near you. And I thought we were done with being peasants.
The deployment of Econ-degree lingo doesn’t help the case.
I get the argument for pricing risk. That’s a genuine improvement on the state of the art.
I dont get NINJA loans, because they represent an unfair fight - a sophisticated loan originator and sales team against people without the background and skills to judge that risk
It's like the insurance when you rent a piece of equipment. The insurance is $8 every time because they judge that to be the statistical risk. Sometimes I'm doing something sketchy and take them up on it. Sometimes I'm not and I don't. The problem is a very simple one on my side but very complex on theirs.
In the Western world, if you have a job but no savings buffer, it’s usually not due to extreme poverty—it’s often a lack of basic financial literacy.
Klarna, et al. market in direct opposition to that education.
The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.
Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
The person you replied to is doing exactly this.
They don’t because it would be a worse use of their $$.
I do agree though that in practice this (pervasive use of credit cards) is one of the major contributors to indebtedness. Because you don't have to pay off that balance entirely, it becomes a psychological trap for too many.
Do you have any friends that earn minimum wage? Do you understand the societal incentives that discourages saving anything? Have you seen what happens to minimum wage earners when they try to save?
Our society enables a few different niches before retirement age:
#0: out of work. Discussing this niche be dragons.
#1: $0 balance - spend money as you get it. Discourage savings by training people that saving doesn't help them (fines, thresholds, societal expectations). Can spend ~2 hours wages on pleasure for your 40 hours work. If you care for kids or elderly parents then expect to spend most of your spare money or time on them. Make sure that society blames the $0 workers for their state by saying "if they only did action Z then all their problems would be solved!". Society doesn't really encourage action Z.
#2: working to pay off mortgage. Requires tenacity, skills and often luck. Society makes the jump from #1 to #2 very difficult. A mortgage is one of societies ways to force savings. Those savings often taken away later in western societies (through different ways, including demographics, illness and means testing).
Need to avoid: https://www.astralcodexten.com/p/come-on-obviously-the-purpo...
My two examples are:
A) a friend working 40 hours, gets 1 hour wages (~$20) to spend on themselves after their bills (they don't buy tobacco or gamble, they might spend their $20 on beer). Not academically smart, spends any windfall money on unnecessary stuff. No car. Now retired. I'm not sure what society could have done to encourage them to become financially savvy?
B) single friend on benefit to bring up kids. Missing partner little help. Government applies thresholds to income or savings that heavily discourage both. They were good with money before kids. Most spare money spent on kids. Also spent some money on unnecessary stuff like new carpet or societaly encouraged addictions (smoking and wine). Couldn't spend money on many necessities (didn't find much time or $ spare). Old crappy car. Now kids are grown, they are working and much better with their money again.
As a financially sensible person, I'm unsure how I could have taught either to be better off financially. Their societal incentives were not aligned with that goal. Others might say they lacked the skills or lacked the drive. I suspect they both have ended up being better off by not chasing financial savings.
The weirdest part is that I have wealthy friends that are not making better decisions.
I'm not sure what the root cause of wealth differences actually are.
Context: I live in New Zealand, and I am a financially well off middle aged guy.
Also, the Visa logo on your debit card applies all of the same benefits as the credit card in regards to risk management. The one time I had my card skimmed, I called the bank, the charges were reversed and they overnighted me a new card.
Credit card you can just go on with your life.
But more to your point, your examples are absurd. You set the bar ridiculously high.
Of course it is okay to buy a single car or a single apartment on credit, as a normal consumer. Getting finance is not the exclusive domain of large, corporate investments.