I'm struggling to understand the point of this service. Why even bother with six weeks? That's barely more time than what you already get from a credit card. Is this meant to be for people without credit cards? And if so, would they even get approved for it? Or is this a predatory service for people who already have high debt issues? I just end up with more questions the more I think about it...
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Apple Pay Later Will Let You Pay for Purchases Through an Installment Plan With No Interest or Fees
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I think it's also/more(?) common in the US to be paid twice monthly (I get paid on the 1st and 15th of each month) in which case this....also doesn't make much sense. But maybe folks want to use each of those two weeks to pick up some odd jobs around the neighborhood 😂
You talking about this and it is simple. They do it as an incentive for people buy stuff using their payment method or to buy their products. It is that simple. Nothing evil about it.
It is how banks compete for consumers' business, and it is how companies like Apple make it more attractive for consumers to buy their products.
Think of it this way, why do stores have sales? I’m pretty sure it’s not because they just like giving away money for free.
Even if the coverage were exactly the same, the risk isn’t, at least if debit cards work the same in Denmark.
If someone makes a fraudulent charge on your debit card, the money is gone until you get it back, right? If someone makes a fraudulent charge on your credit card, you can dispute the charge and the money is never gone unless the dispute is resolved against you.
BNPL may appeal to the younger demographic — Gen Y, Millennials, college, recently graduated crowd who aren’t looking to open a credit card; they also may not be as fiscally educated.
I've never needed to wonder, it's well established that lots of people lack the financial discipline to never carry a balance.
... and it's not "luck" to choose not to spend money you don't have.
You might argue that people have unplanned expenses, and I'd counter that if one is living within one's means and saving some of their income then they're prepared to handle most unplanned situations.
It can be tough to stay home instead of going out every night with your spendthrift friends, it can be tough not buying the top of the line iphone every year and sticking with your two year old phone, buying your clothes at the thrift store instead of fancy boutiques, cooking your own meals and bringing a sack lunch instead of Grubhub and ordering out, etc. etc. etc. That's why it's called discipline.
Yes, AE has a “plan fee” customized for the user/credit account and is a % of the amount carried… so it’s probably less than a traditional APR on the entire balance carried, but still FEE based and not ‘free’..
AND, my understanding of the paypal product in the US at least (and not available everywhere) is that there is still a CREDIT PULL) or you have to have your SSN associated with the account or a bank account linked, and then there is still a credit decision made by PP before granting the BNPL approval.
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I dont know. It’s normally not a problem in Denmark. Most people have two bank accounts. One with a relative small amount and one with savings and paying rent etc. The debit card is tied to the account with the small amount so it minimizes the risk. Actually the biggest problem here is that people discover the fraudulent charge after so many months that it’s too late.
It’s just a cultural thing I guess?
Seems to be the same in other European countries.
The balance is always positive and fluctuates minimum between your monthly paycheck and 0. Plus you are likely to have some savings.
In US the balance is negative between 0 and -your monthly paycheck.
Doesn’t make a difference if the income matches the expenses. It’s just transposed and any bank should be able to evaluate your credit for buying a house by looking on these fluctuations. My bank took one look at the latest three month on my bank account before approving me for a mortgage that was 8x my yearly net income.
Looks like credit card companies will charge the shop owner a lot for transactions. In that situation it would be stupid not to take the cash back, but if the fee (for the shop) is eg 3% they’re just asking 3% more to cover that loss. You then get 2% cash back. So the cash back is a bit like feeding the dog it’s own tail. Of course you would be stupid not to take it now that you already lost it… but you get the point.
You could also just have the bank charge 1% transaction fee for moving money from you to the shop. I don’t know what the fee is in Denmark but I believe it’s less than 1%.
With the “luck” I was targeting the “…most unplanned situations”.
I totally agree that most of it is down to discipline or not. Just didn’t want to offend those that are truly unlucky.
Merchant sells stuff. If he buy stuff for 80 and sell for 100 he can make the 20 he needs for a living.
If he needs to pay 3% to a credit card companie he will have to sell for 103 to maintain the same profit. So he will put a price tag of 103 on his stuff.
You buy with debit and pay 103 and get no cash back.
You buy with credit card for 103 and get 2 in cash back.
Or you live in a place without credit card circus. Merchant sell stuff for 100.5. You pay 100.5 with your debit card. Bank gets 0.5 for moving the money. Merchant gets his 20.
Merchant runs a sale putting 90 price tag on stuff: He will settle for 10 in profit/item, but will have more customers during the sale, clear out the stock and might sell other stuff with more profit due to extra customers. Trust me: unless he’s facing bankruptcy he will not sell with a total loss.
They are all made up figures, so we really can't go by your example.
But even if your figures were accurate, if you live in an area what you all "credit card circus", you could hope that it was different or you can take advantage of the situation and get the best deal possible.
Exactly, financing works the same way. A merchant might offer it to attract more customers. Typically the merchant loses a % by allowing free or deferred financing, but if it means they sell more, it could be well worth the % loss.
Merchants tend to sell more after offering financing specials. That is why they do it, to sell more. That is why Apple offers it, because otherwise, their revenue might not be as high.
Using your made up figures, a merchant might sell an item for 100 under credit with deferred financing for 12 months, but losing 7 due to the financing. It is a win for the merchant, because of the sale. It is a win for the consumer, because they don't have to lose 100 right away. Maybe even invest it and turn it into 110.
But again, made up figures.
Could this be called the "debit card circus"? This really sucks, because there is no advantage over cash with a debit card. You actually pay more for the same goods.
At least with financing or a cash back/rewards credit card, you are getting something.
This is called a checking and savings account in the States. It probably has a similar name in the Europe.
Not sure what you mean here.
The balance in a checking account is as much as anyone wants to put in there. It isn't dependent on how much one gets paid.
High yield checking accounts sometimes have a minimum and/or maximum amount to collect the higher interest. One of my banks, the high yield checking doesn't have a minimum amount required, but the interest drops on balances beyond $10,000.
So you do use checks.... That is why it is called a checking account, even if it is electronic, it is still a check.
When I first met my wife, she used her debit card for everything, and I suggested switching to a credit card for many reasons, but one of them is exactly what you posted.
A while back, this happened to my wife, and her bank account was compromised. She got everything back eventually, but she was without access to cash for a few weeks because her debit card was deactivated.
She now uses a credit card. If the credit card gets compromised, she can always fall back on her debit card when she needs cash.
For those missing the point of afterpay systems, the profit comes from the vendor jacking the price. If you go to buy a TV on afterpay or "interest free terms" or whatever game they are playing, you pay list price. If you are ready to pay now (particularly with a debit rather than a credit card) you can negotiate a better price. The vendor gets a sale at full tilt to a financially shaky customer who couldn't really afford it. The afterpay supplier gets their new cut from this increased revenue. The card operator gets their usual cut (or shares it with the afterpay supplier, as they wouldn't have got their cut if the sale didn't happen).
Just another way of digging money out of people who don't have much and haven't thought it through.
Side note : at least here in NZ, the use of afterpay systems puts a massive red flag on your credit rating, and even though credit scores aren't much used here you are likely to find your ability to get a mortgage is seriously affected
Just another way of digging money out of people who don't have much and haven't thought it through.
Side note : at least here in NZ, the use of afterpay systems puts a massive red flag on your credit rating, and even though credit scores aren't much used here you are likely to find your ability to get a mortgage is seriously affected
Ok… there’s probably a lot here lost in translation and different names. But if the credit card companies are making money then there’s only one place that money is eventually coming from. And that’s your pocket.
You can play their game to minimize the loss if your in a place where that’s your only option. And once they already cut off your tale, you would be stupid not to. But to me the world would be better off without and all these finance people could go out and do something useful like cleaning the streets. We need less of this. Not more.
You can play their game to minimize the loss if your in a place where that’s your only option. And once they already cut off your tale, you would be stupid not to. But to me the world would be better off without and all these finance people could go out and do something useful like cleaning the streets. We need less of this. Not more.
It's coming from someone's pocket, certainly. With a credit card, it comes partially from the vendor (much easier to take credit cards than cash, much safer and cheaper insurance, more sales because people don't need to have money ready), and partially from idiots who don't pay their cards off. So you can play the game and ensure that you are getting a decent deal and the money isn't coming from your pocket.
With afterpay I'm pretty sure that there isn't a way to play the game and come out ahead. That's the difference
With afterpay I'm pretty sure that there isn't a way to play the game and come out ahead. That's the difference
Thanks for the clarification. I hope we all understand that there will always be some outlier instances where misfortune besets someone beyond a reasonable ability to plan for with insurance and so forth. Hopefully those in such a situation in turn understand that general discussion isn't referencing their situations.
I focused on the word "luck" because it seems to often be used as an excuse/reason for differences in situations. I've had people tell me "You're so lucky to be thin!"... no, honey, it's not "luck" that I carefully watch what I eat and exercise regularly even when I don't feel like it. Same for other sorts of stuff in life which are the result of conscious choices such as not spending money we don't have, staying in the same modest home for twenty five years, driving 8-10 year old cars, etc.
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Here’s the thing, though: it’s not necessarily coming from my pocket.
Credit card companies mostly, afaik, make their money from the swipe fees and from interest. Who pays the swipe fees is very complex. Ultimately, of course, they come from the customer, but there are arguments regarding the cost of dealing with cash and other factors that indicate it may be that the swipe fees are at least partially offset with lower prices due to efficiency, higher sales, etc. Given that paying with cash very rarely makes any difference, that cost , whatever it is, is baked into the baseline.
I don’t pay credit card interest. Those who do are almost certainly the ones funding credit card perks, along with a slice of the swipe fees.
I don’t think my world would be better off without them. I can charge everything I buy, have it all consolidated, and make three payments a month. This allows me to keep almost all of my highly liquid money in savings rather than checking. It allows be to dispute fraud before money comes out of my account. Even if perks like cash back and extended warranties, etc. went away, they’d still be a net positive for me.
I’ve bought stuff I can afford to buy outright on 0% APR installment plans just because, well, if it’s not accruing interest and a negligible impact on my credit utilization (and therefore also my credit score), why not?
Why take a (for example) $2,400 hit to my savings account in one blow when it can be $200 a month, such that I still come out ahead because I’m able to save back well over $200 monthly?
I suspect you've misunderstood @ninecows
Since you have the money already in your savings account, you *can* pay in one lump some. You're choosing to take the financing for reasons other than impatience /inability to pay immediately.
Indeed.
And btw: in Denmark (and I assume most of EU) your credit score is generally not based on your ability to pay back what you loan on a regular basis (eg on a credit card).
Instead the bank will typically look at if you can avoid overdraft. So keep your balance in positive or even put money aside. So you don’t need to do a lot of spending with a credit card to proof that you can manage your economy. Just pay your bills on time.