- This video is sponsored
by The Great Courses Plus. Hello, my dudes. My name is Tiffany, welcome back to my
series Internet Analysis, where I like to research
and discuss things relevant to social issues and media. Today let's talk about buy now, pay later. Imagine, you're shopping online, you're putting things in your cart but planning on just closing
it, not buying anything, until you see Afterpay. Buy what you want today, pay
for it in four installments, interest free. Suddenly, that $200 in
your cart could be split into four bite-sized $50 payments. That sounds affordable. Afterpay, Klarna, Affirm, QuadPay, there a lot of these installment
plan type of companies popping up and they've
become very popular, especially with online and
in-store clothing shopping. And at first, these services
seem really helpful. Let's say that you need
an outfit for an event but you don't get paid for a few days. Or maybe you wanna start
shopping more sustainably but those pieces are very pricey, so it can be very convenient
to break these costs up into smaller payments. Quick clarification, so
it seems like Afterpay, Klarna and QuadPay are pretty similar for interest-free payments, but Affirm is actually more of
a small personal loan service and it does have a 30% APR. So the one time that I have used Afterpay was when I spent about $140 on Girlfriend. I could've paid for it outright but for some reason I
wanted to try out Afterpay, it sounded tempting to pay $35 at a time, but every time the payments came out, I found myself getting like annoyed and I just wanted it to be over. It felt like it took
so long to pay it off. So personally, I'm not
interested in using it anymore, I do try to limit my
clothing shopping anyway, but if there's anything I need to buy, I would rather just buy it
outright or not buy it at all. But lately I've been
thinking about this concept, buy now, pay later. It's not new, it's been
around for forever. But I feel like I've seen it
advertised a lot more recently, especially to young people. "I love Afterpay because
now I can get the things "that I want when I want them." When I first heard of Afterpay, my first thought was, if
you can't afford it today but you'll get paid in
a few weeks or wherever, why not just use a credit card? I think credit cards are good for that, I get paid in a few
days kind of situation. I've actually had credit
cards since I was 18 but I think I forget that
most millennials or Gen Zers don't actually use credit
cards or don't want to. But also I only recently paid off my $10,000 in credit card debt so I do understand the
fear of like overspending and racking up a balance
that you can't pay off. I think that's the reason
that a lot of young adults these days stray away from credit. We grew up during the recession, and we're just scared of
getting ourselves into debt. So sometimes it's just a matter of choice like preferring not to have a credit card, not to tempt yourself in that way, but also some people are
unable to get a credit card. Maybe they have a low credit score and they can't get approved for one. So in this situation, it is nice that they
do have another option in paying for something
over time without interest. So services like Afterpay do
seem like a nice alternative but I do think that
they can also encourage those same behaviors and similar
problems as credit cards. You get the satisfaction of
having something immediately weeks before you have to pay for it and you don't see the money leave your checking account right away so it doesn't really feel
like you're spending money. Let's discuss the psychology
of buy now, pay later and why it is so appealing. I think a lot of us grew up
watching those infomercials that were like pay just
four easy payments of 19.99. And I think it comes down to like smaller number is
better than bigger number. - I waste time say lot word
when few word do trick. - It's funny how our
brains can like trick us into believing that it's different even though it's
essentially the same thing. But also, I think a big factor in this is instant gratification. With payment plans, you
can afford to shop more or buy expensive things. As one Afterpay reviewer put it, "Goodbye money, hello full closet." Consumerism in fashion and beauty is huge. We want to keep up with trends, we are enticed by these designer drops, especially when they have
limited edition items. You have Kylie Cosmetics, you have SKIMS, you have Fenty everything. To keep up with these trends, we have to buy things immediately 'cause if we wait, they're
just gonna become old news. And this is where companies
like Afterpay come in. You're looking at your
cards and in that instant, the clothes and products
that seemed out of reach suddenly feel affordable. Basically these companies are tricking us into buying more expensive things. Instead of looking at
that big sticker price, just pay attention to that small amount you'll pay every two weeks. Like I wouldn't spend $100 on a palette but I will gladly spend $25 four times. As Afterpay says, "We do what
we can to keep our customers "super stylish and up to
date with the latest trends!" Ironically, by the time
you end up paying off your fast fashion haul, those clothes might
already be out of style. Time to buy more. Specifically, payment plans
services encourage overspending and overconsumption on
fashion and beauty products. According to this Australian survey, over 60% of users reported that they primarily use
Afterpay for clothing. 64% said that smaller, spaced out payments influenced them to make purchases they wouldn't have normally made had they been upfront,
single transactions. 65% said they typically had one to two Afterpay
payments per month, while 29.3% admitted that they had as many as three to five on the go at once. But you know, as long as you have a clear planned out budget, it's very easy to keep track
of these expenses, you know? Your paycheck comes in
on the 15th and the 30th, your Afterpay payment is $60, easy. But let's be honest, most people and especially younger people, do not closely track their spending. We roughly know when rent is due, when our paychecks come in, but it can be very easy to forget about these smaller upcoming payments. At the time of purchase, you can assume that of course you'll have $40 or so
in the next few weeks, but what if an emergency comes up and suddenly you don't
have that money anymore? Or if you have multiple
Afterpay orders going at once, it can be very messy to have all of these different amounts
coming out all the time. And suddenly those smaller amounts can snowball into a lot of money. I highly recommend if you're
gonna use services like this, to have some kind of a money journal where you plot out all
your bills and your income. Or maybe just put things on a calendar, or maybe a spreadsheet. I mean, we all love a good spreadsheet. Maybe just me. Really though, one of the things I find most interesting about this is that we don't consider
these installment plans to be a form of debt because sure, it's not a credit card balance, but you do owe money and you have products that you haven't fully paid off yet, so you don't really own them yet. And now we've gotta give a
shout out to today's sponsor, The Great Courses Plus. So we're talking about money and I think one of the most
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senior in college right now and yes, the workload does stress me out but actually, I really love lectures. Like if college were
just lectures, I mean. So already looking ahead to post-grad I know that I'm going to miss that and I just wanna make sure that I'm always learning something. For example, learning French. I have been in French classes off and on for like 10 years now and as we know, it's
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thegreatcoursesplus.com/tiffanyferg or click the link in the description to start your free trial. So when it comes to an
installment plan or a credit card, which is better? I think generally, we are
scared of credit cards because we think okay,
if I had an $800 limit, I would just go and
max it out immediately. But I think we're
underestimating our skills here, our ability to control ourselves. Can you believe I missed the opportunity to say we should give
ourselves more credit? Genius. But if you know yourself
to be a big shopper, I would say maybe be
careful with credit cards. So installment plans can be
a safer option for people who kind of want more control and don't trust themselves
with a credit card because you have to be approved for your purchases every time. And each platform has a specific limit on what they will approve you for. So that does kind of prevent
you from buying too much but also you might be approved for more than you could actually afford. So you need to use your own judgment. I'm actually a big fan of credit cards. I know, again, despite
my history with my debt, I've paid it off, I've learned. I'm still in favor of them generally because here in U.S. at least, using credit cards responsibly
is a pretty big part of what contributes to our credit score. So it can be kind of hard to build good credit without credit cards. It's possible, but difficult. And the thing about these services is that you can be making
these on-time payments that could, in a credit card, contribute to good credit history. But you don't get that with
something like Afterpay. But also you should know
that if you miss payments, these services can report
that to credit bureaus, so you can still get
negative marks on your credit if you miss your payments. And also remember that they do have fees, there are only fees if you
start missing your payments but it can add up quickly and you just don't wanna
use these payment plans if you are gonna be likely
to miss your payments or not be able to make them on time. Anyway, again, I'm a big fan in people, at least learning about credit cards, be familiar with the factors that contribute to your credit score. If you learn about it, you can learn how to use
credit cards responsibly and to your advantage, obviously. There are some benefits, you can earn points and you
can get a nice credit score. My score is fantastic, I am bragging. I've worked hard to earn this, and obviously now that I've
paid my credit card debt off, I pay my balances in full every month, it's a great feeling. Credit and consumerism. So there are obvious benefits
to having access to things like installment plans or credit, many of us are financially insecure and we have tight budgets, so the option to have smaller
payments can be life-saving, especially in emergency situations. And of course, installment
plans are very helpful for big purchases like
furniture or appliances, and then we have loans for
cars, and we have mortgages, if you're lucky enough
to be able to buy a home. But again, no matter what you're doing, you need to factor these
things into your budget and you need to have a budget, you need to know what your income is and what you're spending. Again, I'm a big budget nerd
now but it is so important because there's no way that you can responsibly manage your money without having a clear
vision of what is going on and where it's going. Living above our means. Americans in general tend
to live above our means, we spend more money than we make and that means that we rely on credit and putting ourselves in debt in order to maintain our lifestyles. And debt is so normalized,
all kinds of debt, credit card debt, student
loan debt, medical debt. And of course there are
a lot of systemic issues that contribute to certain types of debt, medical debt and student debt especially. And of course it makes
sense that a lot of people would go into debt when
they're struggling financially. So I don't blame people but there certainly are
certain types of debt and certain situations where it's not a problem
of not making enough money but just spending too much money. You could be rich and blow all your money. But anyway, in this last segment, I just wanted to talk
about why or some ways in which debt has become
normalized in American society because it's fascinating and I've learned about it
recently in my classes, so I wanted to share the knowledge. Hope it's interesting. So first, cars. This is something that fascinates me. The most common loan term
currently is 72 months with an 84-month loan not too far behind 10 years ago the most
common new car loan term was 60 months, 60 months. 72 months is six years, so people are getting these
long six-year loan terms for their cars. Obviously a longer loan term can help to lower your monthly payment which makes it seem affordable but obviously in the long run, you're gonna end up
paying more in interest and by the time you pay
your car off in six years, it's gonna be old, six
years older than it was. By the way, no shade to old cars, I think it's smart to buy a
used car in the first place, and my first car was like 16-years-old by the time I paid it off, but let's say you're buying a car that's already four years old, you're using a six-year term, by the time you pay if
off is 10-years-old. (Alexa speaking faintly) Alexa? Don't listen to me. Alexa, stop. She's not mine. I'm just saying worst case scenario, you might pay off your car, it's 10 years old or something and then before you even pay it off, it might already have
problems, I don't know. I live in New York City now,
I know nothing about cars. And this is where I think
we really need to reconsider what it means to be able
to afford something. You know, you can choose to
buy a newer more expensive car and have a long loan term, or you can choose to buy
a less expensive car, have a shorter loan term
and pay more monthly but be able to pay it off sooner. And what about smartphones, dude? iPhones and other expensive phones, we are so used to
installment plans for these. Oh you can get the brand
new iPhone for $30 a month. Wow, great! And then your phone company is like, "Hey, it's been 12
months, you wanna upgrade? "The new phone's coming out." So then you upgrade and you trade it in and you get way less value
for what you have paid for it and then you have a brand new phone with a new installment plan
and you owe $1,000 again and you never actually own your phone. There are a lot of problems that come with us upgrading
our phones every year, it's just unnecessary. But financially, it is a big, big drain and it's part of our budget
that we kind of forget about, or we get used to, but
if you think about it, it's pretty wild, So this last part is a
little bit more historical but basically we have been taught and encouraged to live beyond our means. This is a very brief summary but basically in the '20s,
we were living it up, 100 years ago, baby. The last time things were good. No, that's not true. - [Narrator] New technologies
led to increased wages. Increased productive meant
more product for consumers. Lower income tax rates meant more income for American consumers to spend. Easily available credit allow consumers to spend beyond their means and higher tariffs on imports led to increased profits
for American firms. Despite increased wages, most consumers spend beyond
their means to fuel consumerism. Installment plans advertised
a buy now, pay later approach. Buyers can put a small portion down and pay back loans over time
at a very low interest rate. - People were living
up, they were spending, they were making risky investments and then obviously we had the depression and in that era, obviously, people couldn't afford to
be anything but very careful and spend the least amount as possible. And then around the '50s, we had this post-war recovery period where we were trying to fix our economy. People had discretionary
spending for the first time, what are we gonna spend all this money on? Increased consumerism, baby, you buy all the new mass-produced goodies. - The commercials selling
you products from automobiles to hula hoops, all suggesting
that you're entitled to it, that you should treat yourself, that it's yours for the asking, for the pain, for the down payment. All of it to suggest that this was a country of great wealth, of material plenty and that
you can participate in it. - Treat yourself, buy your
wife a new washing machine. Buy a new TV, you gotta have a TV. You move to the suburbs,
you get a mortgage, and then you need a car. And in this time, family spending money was considered to be a
way to help the country, you're stimulating the economy, you're participating in the economy. Spending money is patriotic
and that's capitalism, baby. Really though, I think
it's very interesting to think back to the '50s and everything that's happened since,
especially in the U.S., but worldwide, this is a common thing or it's becoming more common for people to get used to overspending. I know it tends to be
a problem in Australia, it can be a problem in the UK. I got a lot of messages on Instagram about college students using
their overdraft accounts and I didn't know that was a thing but that's basically
another form of credit or borrowing money while you're a student. I also got messages
from viewers in Germany who were saying like Germans
tend to be very anti-debt, they're very careful with
their budgeting and spending, and I always just find it very interesting to compare the different
cultures that we have and whether you live in a society that values spending
or values being thrifty and paying for things outright or paying for things
through installment plans and always having the new best thing. Anyway, that is that, I hope
you guys enjoyed this video. Make sure you please check
out The Great Courses Plus, if you're interested in learning, checking out those lectures, baby. I'm actually not gonna say goodbye yet, I just wanted to say that I
have attachments on my teeth because I started Invisalign yesterday and so my mouth is kind of raw, it's hard to talk, I'm not
used to these feelings. I might explain this on my vlog channel but I did SmileDirectClub years ago so that helped to straighten my teeth but my bite got kind of messed up and that's been causing
a lot of the headaches that I've been having. So I'm doing Invisalign
to hopefully fix my bite and get that all back. So I gotta put my trays back
in, I have the lisp again, and all these attachments and
buttons feel really weird, so I hope I didn't sound
too weird in this video. That's all, again, thank you guys so much for the love on my last video,
you guys are very sweet. Thank you for being understanding that I am busy in college and
also coronavirus is a thing, maybe my school is gonna
get closed, I don't know. Yes, my college is going to
transition to online classes, this is all very strange, but make sure you guys
practice social distancing, it is very, very important. I hope you guys are safe and healthy, please be careful, wash your hands. Okay, that's all, I'm
gonna have dinner now. You can follow me on Instagram
for some mediocre pics, you can follow me on
Twitter for political tweets and anger, frustration
with the status quo. See, I can't talk right now. Stay tuned for more
Internet Analysis videos. K, thanks, bye. (light quirky music)
