Debt for the Younger Generation

Did anyone else get their first credit card the day they were dropped off at their dorms? I remember the quad in front of my college bookstore was full of tents featuring bank logos and handouts with smiling young faces. I went with a Bank of America card, and a few too many purchases later, I was dealing with a 17.99% interest rate. 

The kids these days are smarter. They felt the financial crisis of 2008 in their parent’s worried faces and saw millennials before them saddled with debt. But lo-and-behold, savvy startups are the new credit card company. Rather than big banks and predatory credit cards, startups have cropped up, allowing young people to buy now, and pay later, with installments made directly from their checking accounts. Oh, and they’re 0% interest, so you have nothing to lose! 

Young Money
Amidst the worst inflation in 40 years and a sad-looking stock ticker, people who’ve bought new outfits or gym equipment with Klarna or Affirm are now struggling to pay installments. These BNPL companies are experiencing huge losses due to defaults. Klarna is laying off 10% of its workforce. Meanwhile, amateur trading apps like Robinhood gamify stock purchases, leading to more than a few horror stories of youthful hopefuls losing thousands in their first market downturn. 

The Good Guys?
Some companies tout themselves as a healthy alternative for young people’s financial futures. The skeptical author of this New York Magzine article believes Public mitigates the risk for young investors through their platform by emphasizing financial literacy on their website. Self Financial aims to help people build credit by giving subprime lenders a chance through a small loan. 

For more on this topic, search the keyword "fintech" or "BNPL" on our platform.