- Walmart has introduced a new payment method at its self-checkout registers, allowing customers to borrow up to $4,000 instantly.
- Financial experts are cautioning consumers about the risks of using buy now, pay later services like Affirm and Klarna, as they could lead to an increase in ‘phantom debt’.
- While these services are not currently reported to major credit reporting agencies, credit card debt in the US is at a ten-year high, with an average balance of over $6,000 and a national debt of $1.08 trillion.
Walmart shoppers are being warned about the potential risks of falling into debt due to a new payment method. The retail giant recently added a payment option to its self-checkout registers, which allows customers to borrow up to $4,000 on the spot. This new method is gaining popularity, but financial experts are cautioning consumers about the potential pitfalls.
Buy now, pay later services like Affirm and Klarna are considered alternatives to credit cards. They allow shoppers to break down the cost of their purchases into interest-free repayments. However, experts are warning that this new way to borrow money could be pushing Americans further into debt.
Walmart added the option to pay with Affirm at its self-checkout registers in December 2023. Tim Quinlan, a senior economist at Wells Fargo, expressed concerns about the growth of this ‘phantom debt’, stating, “Because no central repository exists for monitoring it, growth of this ‘phantom debt’ could imply total household debt levels are actually higher than traditional measures.”
Not only experts but also social media users have expressed their concerns about these services. When Walmart added Affirm to the self-checkout last year, one user questioned, “What will be the outcome of giving millions of consumers the option to finance virtually all of their wants?” Another posted, “Affirm about to rip people off. Shame.”
Despite the criticism, Walmart defended the new payment option in a press release, stating, “As is always true with Affirm, customers are shown the total cost of their purchase and will never pay more than they agree to upfront. Affirm never charges any late or hidden fees.”
However, it remains unclear how much debt has been accumulated through these payment methods as buy now, pay later loans are not currently reported to major credit reporting agencies. Meanwhile, credit card debt in the US has reached a ten-year high, according to TransUnion, with the average balance now more than $6,000 and a national debt of $1.08 trillion.
Affirm and Klarna argue that their loans are better for consumers.
A spokesperson for Affirm told The U. S. Sun, “Affirm empowers consumers with a transparent and flexible way to pay over time. We underwrite every transaction individually and only approve consumers for what we believe they are willing and able to repay. Because we do not charge any late or hidden fees, our success is aligned with consumers successfully managing their finances.”
In the meantime, some Walmart shoppers are advocating for the store to adopt a controversial new idea being tested at Target. There are also six changes on their way at Costco, including a membership price increase.
Clear Thoughts (op-ed)
Walmart’s new payment method, allowing customers to borrow up to $4,000 instantly, is a dangerous step towards promoting financial irresponsibility. It’s a classic case of a corporation prioritizing profit over the welfare of its customers.
‘Buy now, pay later’ services like Affirm and Klarna might seem like convenient alternatives to credit cards, but they are potential traps leading to an increase in ‘phantom debt.’ This unreported debt could potentially push American households into deeper financial crisis.
The idea of enabling millions of consumers to finance their whims instantly is alarming. It’s a short-term solution that could lead to long-term problems, fostering a culture of instant gratification without considering the financial repercussions.
While Walmart defends this new option, stating that customers will never pay more than what they agree to upfront, the reality remains that these services are not currently reported to major credit agencies. The potential for unseen debt is vast and troubling.
In a time when US credit card debt is at a ten-year high, we should be promoting financial literacy and responsibility, not schemes that entice customers into a debt they might struggle to repay. It’s time to prioritize financial health over instant gratification.
Let us know what you think, please share your thoughts in the comments below.