The dangerous rise of “phantom debt” in the USA
Published on December 30, 2023 by KD.
In the last quarter, Americans racked up an additional $48 billion in credit card debt. Financial analyst Sam Bourgi points out Creditnews points out that many are now increasingly turning to “buy now, pay later” (BNPL) financing, a kind of “phantom debt”. Unlike credit cards, BNPL loans allow instant payments without a credit check. The most popular programs include those from providers such as Afterpay, Klarna and Affirm.
Although BNPL data is difficult to obtain, According to Bourg, usage is showing a sharp increase, especially during this year’s Cyber Week sales event. Wells Fargo warns of an “unregulated danger zone” and estimates that BNPL loans will reach around $46 billion this year. Experts fear this could pose a threat to personal finances and a time bomb for the economy. In an interview with Bloomberg warned Bruce McClary of the National Foundation for Credit Counseling:
«Consumers have leaned on their available credit lines for necessities – things we expect can be paid for with the cash they have on hand. But they’re running out of room to maneuver.”
The increasing use of BNPL is leading to growing debt is seen as a potential threat to the economy. Despite the lack of regulation, BNPL provider Affirm emphasizes that they only provide loans to customers who are able to pay.
Bourgis notes that Americans have long used credit cards used for large purchases, but now households would use them to cover daily expenses. Experts see this as an alarm signal that the economy is not functioning optimally.
Data from Bankrate show that 50 percent of Americans have “rotating debt,” a sharp increase compared to last year. Credit card debt has increased by a third in just two years.
2023-12-29 23:15:02
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