Jack McFarlane  0:01  
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Jack McFarlane  1:03  
Hi everyone, and welcome to the HR Happy Hour Network. This is The Play by Play podcast hosted by myself, Jack McFarlane and Nick Schlemmer. 

Nick Schlemmer  1:09  
Hey guys. How's it going? 

Jack McFarlane  1:12  
Let us be the first to wish you guys all a very early Happy Thanksgiving. I almost said Happy Easter. I don't know why I would have said that. That would be very early, but this is November episode. So Happy Thanksgiving to all. I hope everyone had a good Halloween. For us, we're about to have Halloween. It's in a couple days, right, Nick? 

Nick Schlemmer  1:30  
I thought you were going to say Happy New Year. I thought "wow that's early."

Jack McFarlane  1:34  
 That's early. Well, we'll hit that shortly with our Year in Review. It's the next episode. So we'll say Happy New Years then. Are you dressing up for Halloween, Nick? Everyone wants to know. 

Nick Schlemmer  1:43  
I don't know, I think we're supposed to dress up, but I don't have a costume yet. So okay, we'll see.

Jack McFarlane  1:49  
At the time of this recording, Halloween is in two days. Just so everyone knows he doesn't have a costume yet. I am dressing up. I am a Sugar Daddy: the candy. It's a big candy costume. My fiance is a pickle. We went to Walmart before a Halloween party, and all the costumes were sold out; it was just food. So there we go.

Nick Schlemmer  2:12  
There's a great combination for a couple out there. 

Jack McFarlane  2:14  
I know! A pickle and Sugar Daddy. It works. Yeah. Anyway, Happy Thanksgiving, early, to everyone listening, and we've got a fun episode today. Nick, I know it's something that you have experienced with and that I'm sure we've all seen. I personally don't have experience with it and and I'm calling this the newest trend for Gen Z, what is it, Nick?

Nick Schlemmer  2:35  
So it's called buy now, pay later. BNPL, pretty much you're going to not every check out, but you pay for the first portion of your bill in segments. Okay, so usually it splits it up into four segments. You're going to pay for about 25% of your bill straight, just straight up at the register, and then it'll just instantly credit your debit card or any card that you attach to the account that you create, such as Klarna. And there's a few other different services that you can use that stores use. But you attach your card to it, you'll pay, you know, say, your bills $100 you'll pay $25 the first day neck beginning of the next month, here comes another 25. So, you know, it's, it's something new. And like you said, it's, it's a newest Gen Z trend, and I think it's still growing. It's one of those things that not every store like I mentioned, uses it. So I it's still on the rise.

Jack McFarlane  3:36  
Yeah, it's definitely more popular in online shopping. I feel like every time I online shop now, I always get the option, would you like to pay in four installments? And yeah, like Nick said, it's basically you pay 25% up front and then you got three more automatic charges every two weeks. Is about the typical amount that I found while researching. And yeah, it is very up and coming. But this isn't a niche product. About 44% of Gen Z have reported to using a BNPL service in 2024 and I'm sure within the next couple months, when it turns over to 26 that number will have rose for this current year. Fun fact, during the holidays, according to a JD Power survey, 54% of Gen Z used the BNPL which surpassed credit card users that had about 50% usage. So at least in Gen Z, we saw a slight takeover when it came to heavy shopping during the holiday times. And I wouldn't be that surprised if we see that split just throughout 2025 as a whole, where Gen Z is using more BNPL services than a credit card, and a lot of people like it because it's very psychological. Okay, over half of Gen Z, about 55% says it helps them manage finance better than a credit card, right? With a credit card, it can be daunting. Sometimes you're not all about it. You might get, oh, I got $1,000 I can now just spend whenever I want. That is not how a credit card works, but a lot of people do it like that. This is kind of a dumbed down version of a credit card, and we will get into what are the downsides of that, or what are the positives, because there are positives. But first I want to hear your personal experience using a BNPL. Nick, did you like it? Would you do it again? Or was it kind of like, I'll try it and see?

Nick Schlemmer  5:26  
Yeah, so I've used it one time. And you know, ironically enough, it was during the holiday season. I was online shopping, and like you said, that they always pop up with, do you want to pay in those four installments and and and, like you said, it's not, it's not like a credit card, and it's charged like a debit so there's no, there are, you know, those fees for missed payments, like, if you don't pay, no, there's no interest fee. Like, there's but there's no interest. So, like you said, it's kind of like a dumb down credit card. And that's kind of what drew me in, was like, Oh, wait, maybe I can just, you know, spend a lot of money buy Christmas presents, whatever it may be, and you got one more to buy. And it fit in perfectly, in my situation, to where, like, you know what? I'll just pay a little bit right now and then I'll just pay the rest once the New Year hits. You know, I won't have to spend that much money on presents. The next month, I'll have some more funds coming in, I think, you know, utilizing something like this in a very specific, you know, circumstance, I think is great. And like you said, we're gonna get into, you know, the drawbacks of it that we'll talk about later. But for me, it just kind of fit perfectly into where, you know, I charge $25 whatever it was to my debit card, and then, you know, the rest came out every couple weeks. So, you know, in that sense, it was nice. And there was no, you know, it wasn't on a credit card, so that you didn't have to see it sitting there at the end of the month. It was kind of like just automatic, Whoop, there it goes, like you're paying a bill.

Jack McFarlane  6:57  
Exactly, it's not like something you have to go in and make sure you hit the pay button. No, it's automatic. And then if you don't have the funds, or for whatever reason, automatic isn't working, you get charged a late fee instead of, like an interest fee. That just made me think quickly before we kind of get into what are some of the downsides? I remember, if I make a big purchase and I go into my bank app, Chase Bank is the one I use. I'm sure a lot of people listening use that. And so you've probably seen this. If you make a big payment, when you open your statement, it will ask you, do you want to split this into four payments? So it's not just the store itself, but even at least Chase Bank will allow you to do this BNPPL. Now, I haven't tried it. I don't know if you can do one at a time, two at a time. I'm not sure when it comes to chase, yeah, you cannot definitely, at least do it once, which I find pretty interesting. I'm still on the fence about it. I don't know. I'd rather just, I'd rather just kind of pay it now get it done with I'm not sure, but I can see the draw. 

Nick Schlemmer  7:54  
Oh, for sure. 

Jack McFarlane  7:56  
I mean, we'll get into, like, the financial side just a little bit later, yeah, on where there are more benefits, but like any sort of money, credit card, anything, there are a lot of risks that you should know about before using any of these services. So let's jump into that Nick and the first big one that I want to talk about is loan stacking. Yeah, right. Let me run a scenario through your head. Let's say you get a credit card. Credit card, and you've got $1,000 credit line, and you use it all right away. Boom, you used your 1000 well. You now can't use more than that without fees. And eventually, if you're not paying it off and you're racking up fees, the card will it'll freeze you, they'll contact you. Maybe you can set up payment plans, right? They're almost, they're not on your side, but they almost are right. At some point they're gonna be like, Okay, you cannot spend more. You have to pay this back. Here's a plan. We'll set you up pay. That is not how this works, since BNPL is run by many companies like Afterpay Klarna, Affirm, you can have as many as you want out, right? You could stack 3, 4, 5, of them at one time, which when you first pay 25% you can afford that. If you do it five times, there's a good chance you can't afford all those you know. So, yeah, it's it. It's a huge problem. A survey done by The Motley Fool found that 37% of Gen Z users have lost track of their BNPL payments, not just aren't able to pay it, but like, Can don't even know how much they're owning each month because they've stacked so many. And that's where it can really start to bite you. You might not be to the late fees yet, and I'll let you get into kind of the phantom debt, but this is the start of it, right? If you're stacking five, six, 20, loans, if you're using it on everything you buy, you could easily have 10 BNPLs at one time. You know, it can snowball. 

Nick Schlemmer  9:51  
100%, you know, like you said, it's one of those things. It sounds great up front, but then, you know, sometimes there's this thing. Called life, something comes up, and then all of a sudden, you're like, wait, I have four other charges that are about to hit my account coming up, and I cannot afford it. That it's the balance, you know, it's what you risk whenever you do something like this. And Jack, this is interesting, a 2025 bank rate survey found that 66% so of Gen Z users, about two thirds, have experienced these sort of problems, whether it's a missed payment or overspending. 66% I mean, that's pretty significant. 

Jack McFarlane  10:37  
It really doesn't surprise me. I mean, Gen Z. So very young, you know, a lot, if anyone gets a credit card for the first time, not just Gen Z, this is anyone who gets one, often can experience a late fee or overdraft, you know, because you're just excited to spend the money, right? It's having everybody. That's not just a Gen Z problem, but that's kind of how I equate the two. BNPL is like the alternative to credit cards, so to see that two thirds have had a late payment or have overspent does not surprise me, and I'm sure, I'm sure that number goes up as people use use this more as it becomes more common practice. Because right now, it's popular, but still fairly early on, right? You can't really do it in person yet, but it's slowly taking over online. It's almost every website you buy stuff from.

Nick Schlemmer  11:26  
And like you said, maybe, like, I'm thinking about this. Now, you know, maybe I'm younger, 15, 16, years old, first job, and I see, oh, I only have to pay, you know, part of this now? Sure, yeah, like, why not? And then, but those, you know, the fees. Those, they're the real deal. You know, while it's advertised as interest free, some of those late fees that you can be hit with with this BNPL can be as high as 25% of the original purchase. So pretty much the same thing that the same price you just bought it for. You're getting hit with a late fee now you're at, you know, 125% that you're paying. So couple late fees...

Jack McFarlane  12:07  
Exactly, most likely, if you're getting one late fee, there's going to be more to come, since most of these are automatic, a late fee really only happens when you just don't have the funds. And it's it's like Nick said, if you get hit for late fees that has doubled the price of whatever it is that you bought, right? So it really is like a credit card, but I would argue it is worse, and that is because of this late fee creating phantom debt. So when you use a credit card and you put charges on it pay it off, you are building credit. Obviously, that's a good thing, right? You want to build your credit score up. Well, BNPLs build no credit. There is no way to track them. That's why you can stack them so well. And if you make every payment good, but if you would have done it with a credit card and made every payment, you would have gained, you know, advantages, points, more credit, rewards. Instead, it's none of the benefit with all the risk, because if you don't pay these back, you're paying the same fees as a credit card fee if you miss a payment there. Yeah, and yeah, I just that's where it gets hard for me, to be honest, to get behind it. Why not just use your credit card? Or why just get the payment over with, you know? And so that, that's my biggest, biggest drawback with it is that phantom debt. You know, they market it so well, and they use, like you said, the interest free with instead, it's late fees. It hides the real risk that it makes it seem so easy, right? I don't know if you get that as well when you're on there, when you're on Amazon, whatever, it's like, one button. It's like, oh, split this payment into four. You know, you can pay $25 now for $100 item. I mean, it sounds so nice; it's really not, especially since you don't build credit, you don't get points, you're just taking a risk for almost no reason. 

Nick Schlemmer  14:03  
It probably tells you something like that. You know, you hit it, and then it says, you know, there's always the, are you sure, or whatever form it may be, and you always just click, yeah, like it's there. But who actually takes the time to read what it warns you about.

Jack McFarlane  14:21  
Like I said, I haven't done it, so I'm not certain if that pops up or not, but I bet if it does pop up, it literally just says, Are you sure? I doubt it really says, maybe there's a link where you can click on and read the terms and service, or whatever that might probably, yeah, seven pages down. They want you to do this, right? It's like a credit card company. They want you to spend money and incur interest, or, in this case, pay late fees. That's how they make their money, right? Oh, yeah, every time with it, they're not making that much money, but if you're missing seven fees over your 10 stacked BNPLs, oh, they're making bank. You know? That's what they want you to do.

Nick Schlemmer  15:03  
It's two big companies partnering up to where you have, yeah, you know, a firm, and then you have Dick's Sporting Goods, wherever it may be. You know, Dicks is benefiting, as you know, oh, wait, I might draw on more com customers, only having to pay part of the bill. But as a firm, they're getting 125% of the you know, some of this too. So it's like they're getting, they're getting paid back off of this, just as much as Dicks is getting that, like 25% more customers, whatever it may be, so they love it. 

Jack McFarlane  15:33  
The number one, yeah, the number one tip that I would share, and that I try to go by, is especially when it comes to credit cards and stuff like this, not necessarily banks and debit cards, but they might seem friendly. They are not your friend. The credit card companies, BNPL companies are not out to help you. They just are not they're there to make money. And how do they make money by you missing payments and having to charge the fees so you always have to be weary. That kind of got me thinking, how does this tie to payroll and business? And that brought me to Gen Z's that have what I considered a summer job, minimum wage job, compared to a professional job. Okay, so the baseline here is 50 grand a household or less, and 100 grand a household or more. Okay, that's kind of the numbers that I found. There's not too many surveys out there yet, but there's a decent amount. And this gave it gave me a decent idea. And so I want to hear your thoughts on this when I read them off to you, Nick. The first thing that shocked me, Kim, with that 50 grand in 100 grand area, they each use 31% BNPL, so it's not like lower income is using it more than higher income, right? That was my initial hypothesis, is that people that are earning less are going to use this more because you're I would say that's what I would think as well. Yeah, turns out that's not really the case. It's about the same 31% maybe this year, when we get the updated statistics, it's a little more split, but we'll just have to see instead, what I really found was why these lower income compared to higher income, Gen Z jobs are using it so lower income people use it out of necessity. You know, they need to buy their $100 of groceries on Amazon. They can't afford it right now, but in two weeks, they're going to get their paycheck. So 25 now and then, 25 two weeks in the event, right don't do it with your paycheck. They have to. They don't have a choice. So it's out of necessity. Higher income does it more, because it's kind of like when you used it. Just want to see what happens. Maybe they, you know, they're not worried about having a late payment, and they like the idea of not having it all taken out of their account. It's more of just because they use it, just because, for a lack of a better word. 

Nick Schlemmer  17:50  
It's a cash flow tool for them.

Jack McFarlane  17:58  
And then another difference I found was between the late payments and this is probably it's not just a money thing. When it comes to this, you know, you could argue that lower earner could be less educated, could, you know, a number of factors. So you got to keep that in mind, there's a number of factors that could be affecting this number right here, it's not just straight what you're making, but done from this study, it showed that lower income users 40% of time had to make a late payment, while only 13% of high income users had to make a late payment. There is a number of factors that can affect that, but that is the statistic is that the lower income Gen Z are making more late payments. My best guess that ties back to necessity. You know, in the stacking, stacking got to pay my groceries, got to get my gas, got to get these four things. I'll do them all on BNPL. Next paycheck hits. I will pay them off. Then, well, usually, yeah, well, if you're lower income, something might happen in life. Like you said, life happens. Life maybe there's another big charge that comes up. Maybe you had to fix the brakes on your car. You're out a couple 100 bucks now you can't afford two of your four BNPLs, boom. Late payment, late payment, late payment.

Nick Schlemmer  19:18  
I like the point you made, Jack, where it's like they could, they could afford it if they did this, you know, right now, they could afford it that second.

Jack McFarlane  19:27  
Yeah, I think you really did say it best earlier in the podcast when you said, life happens. You know, it's kind of the same thing with a credit card. You might put some stuff on your credit card and be like, I'm gonna pay this off right away, and then, like, let's say you're getting gas put on your credit card. I'm gonna pay that off right away, and then you get a fender bender, and I have to pay $2,000 to fix your car on the way home. And now you can't afford to pay off the credit card. You'd be thinking, wow, I wish I would have just paid with the debit card. You know, you never know. Really never know. Do you have any other thoughts on this, Nick?

Nick Schlemmer  20:03  
You know, I think, I think from a business thinking mindset for as a for profit company, I see the idea, it's there, it's obviously worked based off of some of these statistics, especially in Gen Z, you know, I'm curious to see how it works with maybe some of the other generations, or, you know, are they utilizing it less? Do they experience less missed payments, or whatever it may be? So I think, you know, it's still new, like we mentioned before. It's still growing and gaining traction. But, you know, from a business standpoint, I can see where they're coming from.

Jack McFarlane  20:46  
And just to answer your question, a little bit, I saw some statistics from other generations. It looked like, at least from the surveys I was seeing, that Gen Z used it the most, which wasn't surprising to me. It was such a new idea, it is kind of catered toward Gen Z. I mean, most people that are older have higher paying jobs. I mean, most of Gen Z is still on what I like to call a summer job. You know, I'm still working in a golf course. You are too, but in a totally way, yeah, so in a different way that you you are working there. But, I mean, the pay is probably not that much different for now that will be your profession. You'll make a lot more than a normal golf course worker. So it really is marketed towards Gen Z. I guess my last question for you, Nick, is something I just thought of: if you were a business, right? And especially one maybe when you're running a golf course one day, is there anything that you would like to see businesses do when it comes to maybe educating younger employees about the benefits or what could go wrong. What would you like to see businesses do to maybe help the incoming workforce? Because you know when, when you get your first professional job, like when I get my first professional job, my income is going to go up by like 10 times or more. You know, that's when a lot of people get in trouble when they start getting more money. So is there anything that you would do or you would like to see done to help that?

Nick Schlemmer  22:13  
Yeah, you know, we always, we always talk about, or we always think about or hear that schools should teach students, you know, how to utilize money, how to do this, how to do that. Okay? My thought process is, how about a job doing that? You know, if a job is doing that for their employees, educating them about these BNPLs, credit cards, whatever it may be, but tying it into their own training, in a way, I think that that is going to help me as the business owner, knowing that, okay, all of my employees, from what I can tell, are financially sound, financially, you know, they're doing okay. They're making the right decisions. That's probably gonna, you know, have a reflection on a whole like, you know, how are they working? How are they coming into definitely, know, are they are they stressed? You know, money adds a lot of stress for people in the United States and around the world. I think that if I was a new business owner, if I could somehow incorporate some training or just some education on this, I think it's going to reflect back very positively for me.

Jack McFarlane  23:24  
I agree with you. You. I mean, you said it perfectly. There's nothing I can add. I would do the same thing, one for a training and education and, yeah, try to help your employees, because a non stressed employee is going to work better, for sure. So, I mean, well, said, Nick, honestly, oh, that was perfect. I guess I'll leave you guys with my closing remark on this whole topic. You know, overall, BNPL is marketed as a smart, flexible tool that can help you, you know, buy whatever you want. The data is showing, as you've heard throughout this, show that it can create a very new and real, dangerous cycle of debt that comes with none of the benefits of a credit card if you're paying on time, they want you to impulse buy, stack payments, and then have a high rate of regret at the end of it, because you've now spent twice as much on the product than if you would have just bought it out, right? You know, like I said, they are not your friend, although they might seem like it, you have to be careful. And that's my closer mark. Just be careful. You know, you can use it. Nick has used it one day after this, after we record this, I will use it just to try it out, but you have to be smart with it. Okay, that's the one. Whether you're a business looking to train people on this, or just make sure you are in the know about it, or if you are busy listening to it, thinking about doing a bunch of these loan stackings, just be very careful.

Nick Schlemmer  24:48  
Jack, I couldn't have said it better. What a great way to wrap up the show.

Jack McFarlane  24:51  
Yeah, we're gonna take a quick break, and then we'll come back with everybody's favorite quote of the show. 

Nick Schlemmer  25:06  
All righty guys, we are back finishing up today's episode with the quote of the show and and Jack, I heard this on a recent audio book and and I liked how simple it was, but how powerful the quote was, and kind of how it ties into today's show, you know, and I and you sent me what we were talking about and all this. And I was like, it clicked in my head that this would, this had to be the quote for today. All right. This is from an audio book that a buddy gave me. So I can't remember who exactly said it, or it didn't specify it, but it's simple and effective. It says interest on debt grows without rain. It's a nice reminder that those financial burdens can keep growing even when it seems like something's really happening, it's in the background, but it can grow without rain. You know, everything grows with water. Everything grows with rain. Money doesn't have to do that.

Jack McFarlane  25:58  
It does not. It won't grow on a tree, but, man, it'll grow on your BNPL late, late fees. I mean, that's a great quote. I mean, always bringing it with these quotes. Nick, I love it. Um, I hope everyone enjoyed. I hope you guys learned a lot. Honestly, that was our main goal, learn and not really warn, but caution you so you know what's up. Let us know if you use BNPL services, if you have a good interaction, if you have a horror story, just let us know. We would love to know. And yeah, next episode, guys, year in review, my favorite episode of the year, so I'm looking forward to it and have a Happy Thanksgiving.

Nick Schlemmer  26:35  
Like Jack said, a year in review is coming up soon. Always a fun time. I'm looking forward to it. Today's episode, I had a blast, learned a lot, got me thinking about it, even doing the show as we're recording it. So that's always a bonus. Whenever you start actually, like, okay, it's clicking, but it was a great show, Jack and bye for now.

Transcribed by https://otter.ai