Home Finance Credit card loans shrinking by buy now, pay later plans

Credit card loans shrinking by buy now, pay later plans

The credit reporting company TransUnion said that the 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. A new study report, indicates that credit card lenders might not have lost as much business as suspected during the pandemic. This is to the rise of this new plans. Liz Pagel, senior vice president of consumer lending at TransUnion stated that these new forms of financing are growing the credit pie by opening up more opportunities for both consumers and lenders.

This study analyzed the credit profiles of more than 4.5 million people who applied for point-of-sale financing. TransUnion found that people who applied had reduced their card debt. This proportion will be of 54%, compared with 60% of the general population. Though shoppers have been lured by the financial companies, with the additional ways to borrow, big banks have continued to predict that card lending revenue will increase. This is mainly because the card balances rebound from being paid down during the pandemic.

How much additional card lending banks lost to this plan was not determined by the study. In a separate TransUnion survey, one-third of people who had used a “buy now, pay later” plan said that they would have used a credit card if that plan had not been available. Those applying do not appear to be increasing the risk of losses on existing loans. Delinquency rates on their credit cards six months after their applications. Pagel said that it does not look like, consumers are over leveraging themselves.

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