2mo ago

I got that debt in me

33 comments

How is this different from their credit card?
- Because it's even less regulated. Gotta "disrupt" them all!
  
  "Move fast and break things"
- BNPL splits the transaction evenly every other week or in some cases, every month. There's typically no interest or even fees in some cases (Zip)
  BNPL can be good, it can also be as bad as any other debt can be.
  Because they're typically interest free, it's essentially "free" money. For example, let's say you have a big purchase you want to make of $500, you can afford this purchase out right because you saved money for it. But you can also afford to have 4 payments of 125$ every 2 weeks direct from your paycheck.
  It's better to take the split, and keep that 500 in savings for numerous reasons from generating interest to keeping it for rainy days.
  Now ofc there's caveats, like everything there's nuance. Like every other type of credit, whether it's complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.
  
  While there is no interest charged on your BNPL ... payment plan, micro loan, whatever you call it...
  Making the payments on time does not help your credit scores. BNPL deals do not count as on time payments made, they don't count as an expansion of your total available credit, nor your current debt to total credit limit, number of accounts you have, etc...
  But if you don't pay them, and you go into collections on them, now they massively hurt your credit.
  And if you do, say, suddenly become very injured and miss work, can't make payments... well now you may have many, many, many defaults on all those different BNPL agreements.
  Whereas, if the same thing happened, but you only had maybe 1 or 2 credit cards with larger total credit limits, well, that would still be bad for your credit, but probably not as bad as if you had ten or tens of concurrent BNPL agreements you'd been overlapping and chaining.
  Also, I am not 100% sure about this, but I am fairly confident that, generally speaking, most credit cards will give you 3 months of missed minimum payments before they send you to collections, whereas BNPL agreements can be... twice a month, once a week, and can trigger giant penalties for you if you miss even one... and then those chain and they can send you to collections even faster.
  Again, I'm not 100% sure about all of that last paragraph is totally correct, but... from a consumer standpoint, if you ever miss even a single payment, or a whole bunch of them... you're probably going to be more fucked if your 'loans' are via BNPL then via a or a few credit cards... and BNPL 'loans' are very, very obviously targetted at people who are more likely to miss one or a few payments.
  It is extremely predatory.
  
  Now ofc there's caveats, like everything there's nuance. Like every other type of credit, whether it's complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.
  That's a lot of words to say don't spend money you don't have.
- All the risks of late payment fees and harming your credit score if you miss a payment, with none of the beneifits of raising your score if you pay on time.

Stores had layaway back in them days, it was OK. It wasn't super predatory as I recall. Capitalism will forever get greedier.
- I remember layaway fairly well. The great thing was that there was a small fee at worst, no interest charged.
  It really needs to come back. It’s far better than putting someone in interest laden debt. But debt is profitable.
  
  Wasn't the whole point of layaway to keep the physical item from being purchased by another customer until you could pay it off? How many items today completely sell out?
  Elder millennial, and I've never fully understood layaway.
  
  People will never go back to not getting the thing up front plus then the store has to warehouse all of that stuff she the costs associated with staff looking after and organizing it, in a time when every place is slashing staff this will never do
- But with layaway, you didn’t actually get the product until you fully paid it off right? Which I don’t think you can do with something perishable?
  
  Yes, layaway was typically used for bigger purchases. It wasn't Klarna for a slice of pizza. And in the case of Costco, it seems that it is primarily targeted for big purchases.
- We still have it in Australia (called layby). I know some people who use it to buy larger Xmas or birthday presents way ahead of time and pay it off over many months.
  Here are the rules and costs for Kmart for example: https://www.kmart.com.au/layby/
- Agreed. I remember it being eminently reasonable. I bought a Wii and a laptop using layaway 15 years ago.
  Now, we get Klarna, which will fuck you up if you can't make those payments in four weeks.

Rocket Mortgage has this commercial they run that shows some schlub walking into his house holding three bags of groceries while the voiceover talks about how it used to be six bags. Then the guy's house starts talking to him about how he could mortgage his small bit of equity ... and spend the money on fucking groceries. It's depressing to think about the level of financial illiteracy - not to mention desperation - that could lead somebody to go into debt for food. Not to mention the utter depravity of building a business around taking advantage of such people.