"Buy Now, Pay Later" services like Klarna and Afterpay are the Juuls of personal finance: ridiculously unhealthy for teens to use irresponsibly yet normalized because they replaced something worse.
Whenever I had Health class back in middle and high school, it seemed like every teacher spent half of their lecture time preaching about the dangers of cigarettes and showing us grotesque pictures of emphysemic lungs to gross us out enough that we never wanted to put that substance into our bodies. And it worked. Teen smoking has decreased dramatically over the last few decades, and I can't name a single person I knew in high school who had a cigarette habit. I'm sure this is more a function of my naivety than of the sainthood of my classmates, but it's true nevertheless.
But although cigarettes went the way of the dodo, the void they filled — an activity slightly rebellious that kids can do to get a quick high — wasn't closed. It was just left empty. And before you knew it, Juul swept right in saying, "We can fix that," and put a vape pen in every high schooler's hand, ruining countless lungs and peaceful car rides in the making. Are vape pens less harmful than cigarettes? Absolutely. But that doesn't mean that they can't also do an incredible amount of damage to young people who do not use them responsibly.
Whenever I had Home Ec back in middle and high school, it seemed like every teacher spent half of their lecture time telling horror stories about kids who got their first credit card and thought they now had "free money," so they spent recklessly and racked up insurmountable credit card debt that they were never able to pull themselves out of, a trap that absolutely none of us should get ourselves into. And it worked. Or at least I think so. I don't personally hear many problems about widespread teenage misusage of credit cards, and I can't say I know anyone my age that has substantial credit card debt. The message stuck, and I think my generation generally uses our credit cards pretty responsibly.
But although reckless teen credit card spending may have went the way of the dodo, the function it filled — a way for young people without much money to quickly get their hands on things they want and delay the payment piece — wasn't closed. It was just left empty. And before you knew it, Klarna and Afterpay swept right in saying, "We can fix that," and put installment plans for PlayStation 5s in front of everyone, ruining countless credit scores and surely marriages in the making. Do "Buy Now, Pay Later" services have less potential for harm than credit cards? I think it's likely, seeing as these "Buy Now, Pay Later" startups appear to be somewhat less exploitative of customers than traditional banks. But that doesn't mean that Klarna and Afterpay can't also do an incredible amount of damage to young people who do not use them responsibly.
I repeat: Klarna and Afterpay are the Juuls of personal finance.
And who can blame the Klarna debtors when TikTok influencers have legitimately been marketing these services as a foolproof way to make big purchases. Except they're not. Because you still owe the money. It's pretty likely that an 18-year-old who can't afford to pay $800 for rare Air Jordans in one lump sum payment also probably can't afford to pay for them in 12 installments, and we shouldn't be carelessly encouraging young people to do so. I would view influencers who give poor financial advice in this way no more generously than I would view influencers who are promoting vaping to young adults.
And let’s not pretend like “Buy Now, Pay Later“ is a sexy new idea. Infomercials have been doing this for decades to convinice you to buy the year‘s hottest new food processor for only five easy payments of $19.99.
They market themselves as an ingenious and no-catch way to buy big-ticket things you want, but make no mistake: "Buy Now, Pay Later" services like Klarna and Afterpay are predatory credit lending agencies disguised in a consumer-friendly dress, and we can't continue letting young people fall for this same debt trap just because they want a $1,200 handbag pronto. We've seen this trick before in credit cards. It's the same game. Time to just start learning from it and actually educating people about personal finance.
Comments