NYT: Many Americans Turning to Buy Now, Pay Later Services to Purchase Groceries

Many Americans are turning to "buy now, pay later" services to purchase groceries and other everyday essentials as inflation mounts, and there are signs that the use of these services are pushing people deeper into debt, reports The New York Times.  

According to GlobalData, a data analytics company, Americans made $45.9 billion in pay-later transactions in 2021, up from $15.3 billion the year before. Food accounted for 6% of those purchases.

Companies like Klarna, Afterpay, Sezzle, Zip, Zilch, and Affirm have seen tremendous growth over the last few years, according to the Times.

Zip, based in Sydney, Australia, has seen 95% growth in U.S. grocery purchases and 64% in restaurant transactions. Klarna, which was founded in Sweden, says more than half of the top 100 items its app users purchase are from national retailers or grocery household items. Zilch says groceries and dining out account for 38% of transactions.

"Buy-now-pay-later companies have really insidiously and ingeniously kind of like marketed themselves and advertised themselves as, 'I am just your friend, I am just here to help you out,'" Jathan Sadowski, the author of "Too Smart: How Digital Capitalism Is Extracting Data, Controlling Our Lives and Taking Over the World," told the Times.

Some Americans say the services are beneficial.

Thanks to services like Klarna and Afterpay, "I don't have to worry about groceries, and that is great," said Ambar Valdez, who works for Medicare in San Antonio. Her grocery bills have almost doubled.

"I can focus on my light bill, my phone bill, my internet."

Jessie Blum, an instructional designer in Rutherford, New Jersey, says she uses a pay-later system for her everyday food purchases.

"If I wanted to pick up a coffee on the way home from somewhere and I didn't have any money in my coffee or eat-out budget, I would push it to next month's budget," she said.

Others say the system creates a debt issue.

"It potentially creates a cycle-of-debt issue, where consumers are paying off one type of debt with another type of debt," and end up paying high interest rates on their credit cards, said Mike Taiano, a senior banking analyst for Fitch Ratings.

• Inflation Reduction Act May Have Little Impact on Inflation
• Sen. Braun to Newsmax: Inflation Reduction Act Will Do the 'Opposite'