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Debt for Dinner
The dark side of an economy not working for working people
You’re at the grocery store buying essentials — what you need to feed you and your family for the next week.
The total comes back — and it is more than you planned, more than you have readily available.
But then you see the sign for “Pay in 4.” You ask — and it’s simple. Just pay 25% of your grocery bill today and the rest over the next six weeks. Every two weeks, a payment will be drawn on the account you provide.
You think this will help — you can leave with what you need and make a plan for buying less next week.
It’s a classic debt trap.
You probably will need the same or similar groceries next week.
Even if you can pay the full bill for that week’s groceries, you now have a grocery loan payment due. And then two more.
A new report by the Urban Institute uncovers the ubiquity of debt as a tool to buy basic needs — like food.
While some debt incurred for groceries is from credit cards or payday loans, a fair amount is racked up on Buy Now, Pay Later installment loans.
The Urban Institute report found:
- More than one in six adults reported using BNPL in the past 12 months, including 3.5 percent who reported using BNPL to pay for groceries. Of those who used BNPL for groceries, 37.0 percent reported missing payments on these loans.
- Adults experiencing very low food security were the most likely to report paying for groceries using BNPL (11.5 percent); cash from a payday loan (10.0 percent); and savings (51.3 percent).
And while BNPL can seem like a cash flow miracle, it can end up causing a nightmare.
One survey indicated:
32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.
When families are forced to choose debt for dinner, something’s not working.
It’s possible to make policy choices that change this story — but not clear the political will exists to make that happen.
