Apple Pay Later Will Let You Pay for Purchases Through an Installment Plan With No Interest or Fees

[thv]

I mean, I generally agree, but I could see financing a phone this way. I could probably buy a new Apple Watch outright or put aside some money each paycheck to get a new iPhone, I make enough. But it would take up most of my discretionary spending to buy a new Apple Watch. With this, I could space it out across three paychecks and reduce the impact on any one pay check. Basically, since it’s a 0% interest loan, it’s essentially the same as saving the amount of the payment from each pay check, but you get the item at the beginning of the period instead of the end. That could be useful when buying something that may be supply constrained when you have the money saved up, like this year’s model of iPhone. (And once it’s reported to the credit reporting agencies in the future, that means it’ll build your credit score, making it easier to take out loans on cars and homes.)

This is what people aren't seeming to get... I get a very small amount per month (government, ty). Not everything can be waited for without significant delay or it being gone, and why should I wait when I can easily make the purchase less a dent in my check by paying it over 2 pay periods?

I'm not under the delusion that this is out of the goodness of Apple/whoever's hearts. Of course it's to entice you to buy more things, of course they like people paying late and getting that extra $7. doesn't mean it's not useful for many of us

 

[Sciomar]

Is Apple secretly buying up or installing cell towers, or negotiating access rights? This is another step towards becoming a carrier, which I would be all for if the coverage is good enough. It is also another step towards just renting devices and not really owning them outright.

 

[_Spinn_]

I was really surprised when this was announced.

 

[Apple_Robert]

I take it we can to the pay later option at the Apple Store as well? If so, I might take advantage.

 

[turbineseaplane]

I was really surprised when this was announced.

Me too

All their stuff around financial services feel so weirdly at odds with the branding and vibe they want you to get from the rest of the company and the products

 

[thejadedmonkey]

What happens when customers miss a payment?

This is my question as well. And considering I'm not getting a bill in the mail to use this and the payment cycle is completely outside of my normal bill paying routine, I'd be surprised if I didn't miss it just out of forgetfulness.

 

[kc9hzn]

Is Apple secretly buying up or installing cell towers, or negotiating access rights? This is another step towards becoming a carrier, which I would be all for if the coverage is good enough. It is also another step towards just renting devices and not really owning them outright.

I don’t think Apple really wants to get into the carrier business (certainly not as a MNO instead of an MVNO), consider the complexity of owning/leasing cell phone towers throughout the US alone, let alone the EU and China. The regulatory burdens, the antitrust pressures it would probably trigger, the expense and complexity of buying spectrum licenses, buying and leasing tower sites, and certifying telecom equipment that’s not even end user facing. All of that would be a huge burden even for a “national” rollout that only covers the 100 largest cities, and this is without accounting for the dramatic increase of complexity 5G mmWave has added to the picture. Now multiply this across the whole US (even for just 90% population coverage), and then for each country Apple wishes to operate a network in. More hassle than it’s worth.

 

[bbeagle]

Have they published the terms of this anywhere? They said no interest or fees, but presumably that's only assuming you pay on time? If you miss an instalment there's going to be some kind of penalty?

You don't actually PAY the installment. It's just charged to your Apple Card / other credit card.

For example,
Instead of buying something for $1000 on June 1, you'd get a charge of
$250 on June 1
$250 on June 14
$250 on June 28
$250 on July 12

You make your payments on your regular date through your regular card.

 

[bbeagle]

What happens when customers miss a payment?

There are no payments. The amount of your charge is just split by 4, and charged 4 separate times. You make a payment through your regular credit card.

 

[diskrisk]

I was thinking exactly the same thing, clearly developed by US people, pretty much the only people who get paid fortnightly in the world!

It’s customary to pay fortnightly in Canada and Mexico as well. And I’m willing to bet other countries do that too, but I wouldn’t know since I haven’t worked in them.

 

[bbeagle]

Can this be used with a credit card to get cash back?

Yes. Why not?

Instead of charging ONE time, Apple PayLater charges FOUR times 1/4 of the amount. I've used other vendors that have done the same thing over the past few years. I think Amazon does this same thing on some purchases.

This is Amazon's pay later:

Amazon Monthly Payments - Amazon Customer Service

 

[turbineseaplane]

Why is this offered?

(i.e. what's the angle for Apple or the Finco behind it?)

 

[Deguello]

BNPL is the Facebook of financial products.

It's not being done for you, it's being done for the good of the producer. Like social media. It doesn't exist for you, it exists to make you a product.

Just save your money to buy the stuff you "want".

Can you explain how I’m the product if I use this method of payment? How am I more the product than if the entire amount goes on my card and I pay it in full by the due date?

It will depend on the details of how this is implemented — credit card points, etc. — but, generally, the longer I can push off paying for a zero percent purchase, the better I like it.

 

[tivoboy]

PayPal and American Express already offer this.

Don’t both of those require a small transaction fee other than a special promo going on?

 

[moabal]

Yes. Why not?

Instead of charging ONE time, Apple PayLater charges FOUR times 1/4 of the amount. I've used other vendors that have done the same thing over the past few years. I think Amazon does this same thing on some purchases.

This is Amazon's pay later:

Amazon Monthly Payments - Amazon Customer Service

Some vendors allow it and some do not. For example Peloton installments via Affirm require a bank account.

 

[Rigby]

How is Apple financing this? Does the merchant receive the whole payment immediately? Who is floating the rest of it?

I assume the borrowing cost is baked into the transaction fees. It's probably not much different from a credit card.

What's Apple's benefit? People can buy more expensive Airpods. Consume, people, consume!

 

[unlimitedx0]

Hopefully, Apple entering BNPL raises the urgency & need for regulation & more oversight to protect the consumer.

BPNL feels like a 2008 subprime mortgage crisis waiting to happen. How are the banks/providers determining the credit worthiness of a shopper - without a complete view of that person’s financial situation? And what happens when more customers default & economic conditions worsen?

Klarna racked up $700 million in losses last year, 65 percent of it was from credit defaults. Affirm lost almost the same over the past 12 months, while its marketing expenses tripled to $427 million. 😲

This seems predatory to me; especially if a debit card or bank account is a mandated requirement so they can take the payments via auto draft. Have to see how it all works though.

BNPL is predatory lending.

 

[FelixDerKater]

Is this fronted by Apple themselves or GS?

 

[ninecows]

Paying cash when you can get an interest-free loan is not smart, financially speaking.

I can afford to buy anything that Apple currently sells in online store, but given the choice between paying all upfront, or paying over time, I would choose paying over time, every time, and I do.

Now, if there was a discount for cash, that would be a totally different story.

—

Paying cash when you can get an interest-free loan is not smart, financially speaking.

I can afford to buy anything that Apple currently sells in online store, but given the choice between paying all upfront, or paying over time, I would choose paying over time, every time, and I do.

Now, if there was a discount for cash, that would be a totally different story.

Why is that not smart? Your money will not become more valuable despite 0% interest on a loan.

Just don’t be so naive and think you’re beating the financial system and getting a free lunch. If nothing else you’re paying a higher price for the gadgets them self. All these credit circuses behind the scenes are there for a reason and it’s not to give you money for free.

Edit: sort about that double quote thingy

 

[Juicy Box]

Why is that not smart? Your money will not become more valuable despite 0% interest on a loan.

The Time Value of Money

If you are able to hold onto cash, pay over time interest-free, you could be making money on the cash you are holding.

I rarely pay for consumer goods in cash, either choose interest-free or deferred financing, or use credit that rewards me with cash back.

Unless there is a discount for paying cash, it is financially smarter to pay overtime with interest-free/deferred financing, or use credit card rewards to get cash back or some other type of reward.

If nothing else you’re paying a higher price for the gadgets them self.

Please explain why someone would be paying more for the gadget if they chose free financing over cash.

That isn't how the Time Value of Money works.

ll these credit circuses behind the scenes are there for a reason and it’s not to give you money for free.

No, they do it to make money by giving incentives for people to buy things.

But, there is no reason, from a financial point of view, to pay cash when there is no discount for doing so.

 

[unlimitedx0]

Is this fronted by Apple themselves or GS?

Here’s a CNBC article from last July about Apple working with GS on BPNL product. A lot of unknowns.

If Apple is fronting the capital, it brings up questions about the company’s objective/end result — is it trying to move into the financial services space.

 

[tivoboy]

Is this fronted by Apple themselves or GS?

It’s unclear where and how the cashflow and liability opbiligation lies with this new program, but apple has this year applied to take over some of the banking obligations that Goldman Sachs was historically offering via the apple CARD. Many of the CURRENT BNPL firms were indeed taking on the carried credit risk (the merchant was getting the full $$ immediately in exchange for a 5-10% discount at the time of purchase offered to the BNPL firm, essentially the legacy affiliate or marketplace affiliate credit one could get. Merchant got 90-95% of the money immediately without any credit or loss risk.

Then the BNPL entity was on the hook for the full amount and the full credit risk (minus the first payment amount of course) and I’m sure had loss provisions but ALSO could affect rather significant and usurious financial terms if the buyer didn’t pay ontime within the allotted FOUR monthly payment periods. This in of itself isn’t new, nearly all merchants has historically offered some type of buy now pay later, usually offering something like 6-12 months of “finance free” loans and if you paid it off within the allotted time, you paid NO fees or interest and essentially got a payment plan over time. BUT if you failed to pay it off ontime, well then god help you with the significant fees that the merchant then could charge including often ALL the calculated carried interest that you might have historically paid.

Apple has essentially offered something similar to buyers/users for a few years with their 24 months to pay 1/24 of the retail price on new devices.. again though, if you DON’T pay it off in that period of time then there ARE additional fees.

The real area where BNPL does need some new regulation to it is that in almost all cases of current BNPL there is NO/ZERO reporting of the essentially carried loan and obligation amount to ANY credit agency. In contrast to a vehicle loan, or credit card carried balance or mortgage or HELOC or anything else there is no visilibility to a new or current lender that this person might have 1000’s if not 10.000’s$ of essentially short duration loans outstanding across multiplied BNPL providers that they could be on the path to defaulting on and should if large enough be taken into consideration when/if there is going to be a new credit application or credit worthiness done. That is a problem actually for ALL of us.

I think this SIX week program proposal by apple is really just they are dipping their toes in the water, with relatively low/limited overall risk (certainly nothing like the FOUR month timeframe of the other BNPL players) and once they see more regulation around things they will probably move to extend it out to 2-3 months but with of course similar caveats and fees like the current players.

The multiple short duration payments that apple is proposing, MIGHT be related to the way that apple has historically gotten paid for being the transaction PROCESSOR. Unlike a credit card company that gets 1-3% (sometime more) from the merchant apple gets something like .015% (15 cents per 100$) per transaction to just FACILITATE the purchase transaction, be it to Apple Card or a bank debit or ACH or other credit card. My HUNCH has alway been that they get a % amount PLUS a very small PER TRANSACTION fee, so before anyone sales ”well, .015% per $ is the same as if it is all charged at once or over four transactions” that is TRUE, but not if it is an even smaller PER TRANSACTION fee PLUs this tiny per transaction facilitation charge. While tiny multiplied out against 100M‘s of transactions and $$ this could prove to be significant on an annual basis, certainly enough to possibly cover a lot of potential loan loss provisions.

 

[chikorita157]

I see absolutely no point of BNPL, which is basically broke now, broke later, especially when there are credit cards that give 0% interest as an intro offer for 12-15 months. Financing is okay if you properly budget for it. If you break the payment for 6 weeks, you may as well just use a credit card and pay in full and have the extra perks that are on some cards like purchase protection and on some cards, extra year of warranty. Usually, a credit card gives you a 25 day grace period after the statement date before you need to pay for the bill, which is basically the same thing as BNPL, but less predatory with the added perks.

Credit is a tool that one needs to use responsibly, but BNPL is a terrible idea. I will never use it.

 

[ninecows]

The Time Value of Money

If you are able to hold onto cash, pay over time interest-free, you could be making money on the cash you are holding.

I rarely pay for consumer goods in cash, either choose interest-free or deferred financing, or use credit that rewards me with cash back.

Unless there is a discount for paying cash, it is financially smarter to pay overtime with interest-free/deferred financing, or use credit card rewards to get cash back or some other type of reward.


Please explain why someone would be paying more for the gadget if they chose free financing over cash.

That isn't how the Time Value of Money works.



No, they do it to make money by giving incentives for people to buy things.

But, there is no reason, from a financial point of view, to pay cash when there is no discount for doing so.

So you have 1000$. Invest these and then buy an iPhone using a 1000$ loan at zero interest.

N months later you have to pay back that loan.

If you got 5% return on your investment that’s cool. Pay 1000 back and keep 50.

Please let us know where you can get a guaranteed positive return on such short term investments.

Or… you don’t have 1000 $ but want a new iPhone now because you really feel you deserve it. You borrow the money at 0% interest. Then you drop it on a concrete floor. Now you have a loan and no iPhone.

Wrt cash-back then yes, it would be stupid not to take it if offered, but it just means that you’re paying too much initially. And that this whole system is really crooked

 

[Juicy Box]

Please let us know where you can get a guaranteed positive return on such short term investments.

If you want a guaranteed positive return, then High Yield Checking Accounts would work.

So easy, you don't have to do anything, just let the cash sit there.