Why You Should Never Use Klarna to Buy Groceries

If you’ve ever gone grocery shopping in the past few years, you know that food prices are damn high. Like everything else, food prices are subject to inflation, typically around 2% per year . But last year, food prices rose sharply, by almost 12%. For people who already treated grocery shopping like a military operation, coupon hunting and cooking like crazy to try and stretch their budget , this has made feeding themselves and their families a nightmare, especially when the cost of literally everything else skyrockets. in the same time. If you have no money left after paying rent, utilities and car insurance, how do you buy food?

Some people have turned to buy now, pay later (BNPL) services to bridge this gap. These services, such as Klarna , Zip or Affirm , essentially loan you money to make a purchase at 0% and break it down into four payments over several months. If you pay the full amount on time, you will become golden.

It’s easy to see why this is attractive to people who are struggling to buy food, so it’s no surprise to learn that grocery store usage of BNPL services grew by a whopping 40% in early 2023 . If you’re broke and hungry, you can roll your grocery bill over to the next month’s budget, theoretically without any penalty. But buying products with a Buy Now, Pay Later service is a bad idea.

Hidden costs for BNPL services

One of the main reasons for the complexity of BNPL services is their status: they are loans, but they have largely escaped regulation because they do not charge interest upfront. Unlike a credit card purchase, Klarna will pay for your products, and if you return them as agreed, there will usually be no cost to you.

Then you might wonder how services like Klarna make money because they don’t buy your products out of the goodness of their hearts. They charge merchants large processing fees and sometimes receive additional fees from the merchant in exchange for offering a service at the checkout, but their main source of profit comes from their late fees, which can sometimes double the amount of monthly payments , which can lead to a complete collapse. . fragile and carefully planned budget.

There is also a psychological factor: BNPL makes it easy to spend more than usual and buy more expensive things. Grocery stores are already essentially food-based quest rooms , designed to upsell and manipulate you, so adding BNPL to the mix can result in you having higher grocery bills than normal when you couldn’t afford imagine the usual bill for groceries first. And missed payments for BNPL services can negatively impact your credit score like any other debt, making it harder to get a loan in the future.

Finally, buying groceries with BNPL also means you’re lowering your future food budget. If you don’t have $200 for food today and are saving your grocery bill, you’ll need to extract $50 a month for the next four months to pay it off, making it much harder to scrape together that food money. go ahead.

Alternatives

Using BNPL services for products is a bad financial idea. But it’s easy to tell when you have a fridge full of food. If you can’t pay your grocery bills without going into debt, what choice do you have?

The US food security system is woefully inadequate and getting worse. Since the growth spurt caused by the pandemic, many programs designed to support struggling people in the US are being phased out or downsized , including many food and nutrition services that helped people feed themselves and their children . So it’s easy to see why people find BNPL services so enticing at the grocery store checkout. But there are options to feed your family without putting yourself at financial risk:

• Supplemental Nutrition Assistance Programs (SNAP). Contact your state’s SNAP office to find out if you are eligible (each state has its own systems and requirements). If yes, apply as soon as you decide you are in danger of not being able to afford groceries. It can take a long time to process your application, so the sooner you apply, the better. You will receive a card that can be used at certain stores to buy food and even seeds to plant a garden to grow your own food. Feeding America offers help with applying for SNAP benefits and has a lot of other information about support programs. If you are a family feeder, you should also review the Women’s, Infants and Children’s (WIC) Supplemental Nutrition Program .
• food banks. Feeding America can help you find a grocery pantry in your area. You can also check out Full Cart , a “virtual” food bank that will deliver boxes of groceries to you (beware, there is a waiting list). And FoodFinder is another website with a wider network of free grocery resources and also offers a smartphone app.
• Local services. Many neighborhoods have community centers that often have food pantries or offer local services to help people who have difficulty buying food. Local churches and religious groups also often offer food aid even to non-members. If you have never interacted with local authorities or community organizations, you can try calling 211 to find out what services are available near you.