Connect with us


Buy now, pay later plans not shrinking credit card loans, says TransUnion

Buy now, pay later plans not shrinking credit card loans, says TransUnion 1

By David Henry

(Reuters) – Borrowers who apply for “buy now, pay later” or other point-of-sale financing tend not to pay down their credit card debts as much as the general population, credit reporting company TransUnion said on Thursday.

The conclusion, from a new study, indicates that credit card lenders might not have lost as much business as suspected during the pandemic to the rise of “buy now, pay later” plans.

“These new forms of financing are growing the credit pie, opening up more opportunities for both consumers and lenders,” said Liz Pagel, senior vice president of consumer lending at TransUnion.

The study looked at credit profiles of more than 4.5 million people who applied for point-of-sale financing from October 2019 through March.

TransUnion found that a smaller portion of people who applied had reduced their card debt, 54%, compared with 60% of the general population. Some 20% increased their card debt by more than half.

Though financial technology companies have lured shoppers with the additional ways to borrow, big banks have continued to predict that card lending revenue will increase as card balances rebound from being paid down during coronavirus lockdowns.

The study did not determine how much additional card lending banks lost to “buy now, pay later.”

In a separate TransUnion survey in August, one-third of people who had used a “buy now, pay later” plan said they would have used a credit card had the plan not been available.

Those applying do not appear to be increasing the risk of losses on existing loans, TransUnion said. Delinquency rates on their credit cards six months after their applications were only slightly worse than the general population at 3.2% versus 2.7%.

“It does not look like, at this point, consumers are over leveraging themselves,” Pagel said.

(Reporting by David Henry in New York; Editing by Mark Potter)

Editorial & Advertiser disclosure
Our website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate


Newsletters with Secrets & Analysis. Subscribe Now