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Yahoo
a day ago
- Business
- Yahoo
The Rise of ‘Cute Debt'
The Atlantic Daily, a newsletter that guides you through the biggest stories of the day, helps you discover new ideas, and recommends the best in culture. Sign up for it here. On the subway a few weeks back, I noticed an ad for a 'buy now, pay later' service from Cash App. It read: 'Little payments are so much cuter.' This ad wasn't made for men, I thought. 'Buy now, pay later' is promoted as interest-free borrowing, which many people, frightened by the idea of going into debt, see as safer. But miss a payment, and the late fees kick in—$8 here, $6 there. Miss payments on a few different orders, and the fees add up fast. You could be paying much more in the end than you would if you were paying interest on a credit card. Worse, your account could be sent to a collection agency, destroying your credit score. On average, men have more total debt than women, but women are 68 percent more likely to use installment payment services such as Afterpay, Klarna, Affirm, and Quadpay, a 2024 study by the Federal Reserve Bank of Boston found. This might be less about how women spend money than it is about where they spend it. Although buy-now-pay-later services are accepted on purchases as varied as airfare and electronics, clothing accounts for more than half of the services' gross merchandise value. And women are the bulk of those customers. This is easily gleaned from the services' advertising campaigns. Klarna, for example, paired up with Paris Hilton to create the 'House of Y2K,' an interactive pop-up devoted to Millennial nostalgia selling a limited-edition 'Paris Hilton x Klarna' velour tracksuit; Klarna also partnered with the fast-fashion brand Shein on pop-up stores, including a bubble-gum-pink party bus/traveling store emblazoned with the phrase In Pink We Trust. Murals in Los Angeles and New York featured illustrations of cute strawberries and ice-cream cones and the tagline Afterpay is like eating the whole carton and spreading the calories out over 6 weeks. The business model of 'buy now, pay later' companies is not really about selling their services to women directly. It's about selling themselves to the retailers that want to sell things to women. Lots of online shoppers load up their carts but, once they see the total cost, don't follow through. Companies such as Afterpay pitch themselves to merchants by promising to solve this issue of 'cart conversion'—shoppers are more likely to click 'Pay now' if they have the option to pay less upfront. Jessa Loomis, an associate professor at Newcastle University, in England, is an expert on these companies; she describes herself as a 'feminist economic geographer' whose research focuses on the 'everyday effects' of global finance. The companies make their real money not from the fees they charge consumers, she told me, but from what they charge 'the retailer or merchants to be able to have 'buy now, pay later' embedded in their payment ecosystem.' They are essentially telling brands, 'We can get women to spend money here.' And it's working. 'Buy now, pay later' has become the gateway drug to consumer debt for more and more women. I first used Afterpay in 2018, when I was 20. I had a sorority formal coming up, and the other girls at my SEC school would be wearing their wealth loudly. I couldn't be the one in the same sequined bodycon number that I wore to last year's spring fling. I filled my online cart with five dream dresses, planning to go back and narrow my choices down, dress by dress. But then I noticed an alternative way to pay. I could have all the beautiful gowns at once, for only a quarter of the total cost up front. The service required three subsequent payments at two-week intervals. But if I promptly picked my favorite dress and returned the rest, I'd be off the hook for the second payment by the time it was due. My plan seemed foolproof. As long as I was prompt with my returns and consistent with my payments, I could have what I couldn't afford. Afterpay quickly became a habit. [Mac Schwerin: The 'buy now, pay later' bubble is about to burst] Throughout my childhood, my Dave Ramsey–fearing parents warned me of the dangers of credit cards. They kept their cash in envelopes, and when the envelope labeled Eating Out was empty, we'd be enjoying Hamburger Helper for the rest of the month. I didn't really understand how interest or building credit worked. Afterpay felt like a safer alternative, but it got me used to 'carrying a balance.' When I did get a credit card a few years later, I thought I could pay 'in installments,' but compounding interest quickly made my debt mount. Before I knew it, I was paying off only the minimum each month, and drowning in debt. I was embarrassed to talk about my debt with my friends, but the more I asked around, the more I realized I wasn't alone. None of the men I asked had ever used Afterpay or its competitors. But many of the women had. 'I remember the first time I used 'buy now, pay later,'' one friend—who's now 27 and owes $16,000 in credit-card debt—told me. It was for a clothing haul before a family trip to Europe during college. 'I was like, Okay, I'm gonna return half of this. So I'll do the four payments so that I can pay a small payment now and not have to cough up all that at the same time. I didn't end up returning any of it. Shocker.' She said that, like me, she had found installment payments more palatable than putting the full expense on her debit or credit card, but that they led to out-of-control spending, which in turn led to more debt. Another friend, who first used Afterpay when she was waitressing in college, described it as 'a bite-size way to pay for things I couldn't really afford.' Buying indulgences made her feel guilty; smaller payments assuaged the guilt. 'Never once did I think that I couldn't really pay for these things. The way I budgeted was week to week.' Lots of our spending was driven by trying to keep up with our friends—not just the real ones, but also the parasocial ones we follow online. Social-media influencers seem to be just like us, only one step and hundreds of thousands of dollars ahead. 'The essence of influencer culture is a kind of low-grade gaslighting about what is possible and what is attainable,' Chelsea Fagan, founder of The Financial Diet, a media organization focused on promoting financial literacy among women, told me. Fagan began a blog to hold herself financially accountable when she found herself in credit-card debt at age 25. Social media leads us to believe that 'every purchase we make now is sort of a micro-expression of identity. Whether it's the smoothie that we're drinking or the place that we travel to or the bag we're holding, all of it is kind of an expression of the type of woman we are.' But 'there's just such a lack of transparency, and of financial honesty, around it.' One of my friends—who is in $15,000 of credit-card debt—describes social media as 'our generation's homeownership.' Our feeds, with their photos of meals or outfits, are the way we prove that we've made it, she said. 'It's like our white picket fence,' in a world where none of us can actually afford a house. Naturally, 'buy now, pay later' companies have invested in influencer marketing campaigns, resulting in a flood of 'get ready with me' videos in which women show themselves purchasing products with Afterpay. Many are clearly ads: 'Hot girls love all kinds of flexibility,' one TikTok comedian says in reference to Klarna; a catchy Cash App–inspired rap goes: 'Cash App, I can make that cash clap.' [From the January/February 2021 Issue: Why is there financing for everything now?] But other videos masquerade as financial advice: 'Basically, you just, like, split your payments up into, like, four manageable chunks, then you pay it over time. It's called shopping responsibly, okay?' the comedian says in another Klarna-sponsored sketch. 'Let's be real—ticket prices and new clothes really add up,' an influencer says over footage of her attending a music festival. 'This is where Klarna helps me.' In small type, near the bottom of the screen, a disclaimer: 'Borrowing more than you can afford or paying late may negatively impact your financial status.' Lots of people my age like to use the phrase girl math to justify reckless spending. It's only partly a joke. Didn't buy that $700 Gucci wallet? Now you have $150 to spend on dinner out. Girl math! A man bought your drink last night? Now you have extra money for martinis with your friends. Girl math! 'I hate the idea of 'girl math,'' Bola Sokunbi, the founder of Clever Girl Finance, told me. 'Math is math. And if it doesn't make sense as a purchase, it just doesn't make sense. Don't put girl on it and make us seem like we are stupid.' The phrase 'makes it seem that it's cute or silly to not understand finance,' Haley Sacks, the woman behind the popular Instagram account Mrs. Dow Jones, told me. 'It feeds the stereotypes that money is masculine and women should just spend it.' She said many young women confuse consumerism with empowerment. But 'you don't want to glamorize being out of control.' This year, buy-now-pay-later services are predicted to hit nearly $117 billion in transaction volume, thanks largely to young, female buyers. The biggest danger is that ''buy now, pay later' normalizes using debt to live,' Sacks says in one of her videos. 'One moment, you're financing your Coachella outfit; the next moment it's groceries.' And indeed, this is happening more and more frequently—a quarter of 'buy now, pay later' customers say they use an installment-payment service to shop for food. This summer, though, FICO began including buy-now-pay-later loans when calculating credit scores, and Affirm began sharing its Pay-in-4 customers' data with the credit bureau Experian. Now that credit scores are directly at stake, savvy customers may opt out of paying in installments. For younger customers desperate to get their hands on the next new thing, it might not matter. It wouldn't have stopped my 20-year-old self's shopping spree. But at least buy-now-pay-later loans will be seen as what they always were: debt. Article originally published at The Atlantic
Yahoo
4 days ago
- Business
- Yahoo
How to avoid late credit card payment fees
Key takeaways Setting up automatic payments ensures you're never late. You can choose to pay the minimum due, the full statement balance or a fixed amount monthly. If you're not using autopay, schedule calendar alerts or reminders in advance of the due date. Paying several days early can help avoid processing delays, especially on weekends or holidays. If a payment is late, act fast by paying the balance as soon as possible, contacting your issuer or requesting a fee waiver. Some issuers may forgive a first-time late fee, especially if you ask promptly. While the thought of paying a credit card bill isn't thrilling for anyone, it's an unavoidable truth of being a cardholder. What's also true is that being late on payments can cost you even more than you bargained for. Missing a credit card payment can mean getting hit with late fees, penalty APRs and dings to your credit score. However, there are ways to get ahead of your bills and even recover from missed payments with little harm done. Ways you can avoid late fees Late credit card payments can lead to costly fees and damage your credit score, but they're easy to avoid with a few proactive steps. Here are some effective ways to stay on top of your due dates and keep late fees at bay. Set up automatic payments One of the easiest ways to ensure on-time credit card bill payments every month is by setting up automatic payments. This means that your credit card payment will be withdrawn from your bank account automatically every month. You can elect to pay the minimum amount, the amount on your statement balance or a fixed amount of your choice. Keep in mind that this method still calls for some attention to detail. For instance, if you don't have enough money in your account to cover the automatic withdrawal, you could rack up overdraft charges. Set up calendar reminders If you don't like the idea of automatic payments, try setting up calendar reminders for yourself instead. You can schedule reminders as far or as close to your payment due date as you choose — even getting notifications sent directly to your email or phone. Scheduling your own payment reminders is a great way to keep things from sneaking up on you. Change your payment date If you're having trouble making on-time credit card payments because they fall at an inconvenient time of the month (right before payday instead of right after, for example), try changing your credit card payment date. You can do this online, or you can call the number on the back of your credit card. If you have multiple credit cards, determine whether it would be more helpful to make each payment due on the same date or on different dates. Locate the late fee warnings in the fine print If you want to know how much your credit card charges in late fees, check the fine print. Your credit card statement, whether you get it in the mail or retrieve it online, should have information about late fees. This information is usually on the first page of your statement, under the heading 'Late Payment Warning.' The fine print might also warn you that late payments will result in a penalty APR — meaning your credit card interest rate will go up. If you don't pay off your credit card in full every month, having a penalty APR applied to your balance could end up costing you a lot of money. If you do get stuck with a penalty APR, it should return to your regular APR after six months of on-time payments. How much late fees can cost you Previously, the Consumer Finance Protection Bureau (CFPB) had set limits on how much credit card companies can charge in late fees. However, the CFPB no longer enforces any federal fee caps specifically on late credit card fees. Instead, card issuers continue to abide by the broader requirements of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which mandates that penalty fees be 'reasonable and proportional' to the violation. Typically, late fees can be as high as $41 for repeat violations, with around $30 to $32 being common for first-time misses. However, these numbers come from individual issuer policies, not federal regulation. Keep in mind that the late fee can never be higher than the minimum payment due on the credit card. In other words, if your minimum payment is $25, your late fee can be no higher than $25. How to appeal a late fee If you miss a payment, don't panic — as many credit card issuers are willing to waive a late fee, especially if it's your first time. Here are a few ways you can try to appeal a late fee: Make the payment immediately. Pay the overdue amount as soon as possible to minimize further consequences. Call your card issuer. Contact customer service and explain that the missed payment was accidental. Request a fee waiver. Politely ask if they can remove the late fee, particularly if you have a history of on-time payments. Ask about penalty APR removal. If your interest rate increased due to the missed payment, request a review or reversal of the penalty APR. Prevent future issues. Set up payment reminders, enroll in autopay, or adjust your due date to avoid missing payments again. The bottom line While it's never advisable to form a habit of making late payments, accidental cases are not the end of the world. Be honest with yourself about any disorganization or lapses in memory when it comes to managing due dates, and take some practical steps to protect yourself moving forward. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
CBS News
07-08-2025
- Business
- CBS News
Can a debt collector freeze your bank account? 3 things to know
With credit card balances topping $1.2 trillion nationwide and payment delinquency rates climbing, the financial pressure is mounting quickly for millions of Americans. And, as sticky inflation lingers and interest rates remain high, it's becoming even more difficult for many cardholders to pay off what they owe. So, for many, what may have started as a missed payment or two is now spiraling into debt collection calls, late fees and ongoing credit score damage. But when you have debt in collection, it's not just the barrage of calls, extra fees or the hit to your credit score that can disrupt your finances. In some cases, the fallout can be much more severe. And, one of the most jarring potential scenarios you may have heard about is having your bank account frozen by a debt collector. No warning. No access. Just locked funds and a financial mess that's suddenly even harder to untangle. This scenario can sound extreme or even unlikely. After all, there are laws that debt collectors must follow, so can they really go that far? Below, we'll detail what to know about whether a debt collector can legally freeze your bank account over an unpaid debt. Find out how to get rid of your collection debt for less than what you owe here. The short answer is yes, a debt collector can take steps to freeze your bank account. However, debt collectors cannot just arbitrarily freeze your bank account. They can only do so under specific legal circumstances and through proper court procedures. If you're worried about the potential for this to happen, though, here's what else you should know: A debt collector cannot freeze your bank account without first obtaining a legal judgment against you. This means they must file a lawsuit, serve you with proper legal notice and win the case in court in order to take this step. The problem is, though, that many people inadvertently allow default court judgments to occur by ignoring the court summons. And, once that's obtained, the debt collector can request an order from the court that allows them to freeze and potentially seize funds from your account. That said, the judgment process typically takes several months and requires multiple legal steps. And, you have the right to defend yourself in court, negotiate payment arrangements or challenge the debt's validity, so make sure you take these or other steps to resolve the issue before it gets to the point of a frozen bank account or wage garnishment. Find out how the right debt relief strategies could protect your finances today. Debt collectors cannot touch all the money in your account, even with a valid court judgment. Federal and state laws protect specific types of income from garnishment, including Social Security benefits, disability payments, unemployment benefits, veterans' benefits and pension funds. These protected funds maintain their exempt status even after being deposited into your bank account, though you may need to prove their source to have them released. And, many states also have "head of household" exemptions that protect a portion of wages for people supporting dependents. Some states provide exemptions for a certain amount of general funds as well, regardless of their source. However, the burden often falls on you to claim these exemptions and prove that your funds qualify for protection. If your bank account has been frozen, it's important to understand that you're not completely powerless. You can file an exemption claim with the court to have protected funds released, often within a few days if processed correctly. Or, you may be able to negotiate a payment plan or a settlement with the debt collector to have the freeze lifted in exchange for lump-sum or regular payments. Some debt collectors are willing to do this to avoid the ongoing costs and complications of maintaining a bank levy. You can also challenge the underlying court judgment if you believe the debt is invalid, the amount is incorrect or proper legal procedures were not followed. While debt collectors can freeze your bank account in certain cases, they must follow specific legal procedures and obtain court approval first. So, if you're worried you're at risk of this, your best protection is typically to stay informed about the collection process, respond to legal notices promptly and understand your rights under federal and state law. And, remember that ignoring the situation rarely makes it disappear. Taking proactive steps to address debts and understand the collection process, though, can help you maintain control over your financial future.
