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If BNPL are basically zero interest loans, doesn't it make sense for everyone to use BNPL as much as possible? The unspent money can then be presumably reinvest
by jameslk 4y ago
If BNPL are basically zero interest loans, doesn't it make sense for everyone to use BNPL as much as possible? The unspent money can then be presumably reinvested into e.g. the stock market or even a high yield savings account. A sort of interest rate arbitrage.
Ultimately the merchants are footing the bill and then they pass it on to consumers in the form of higher prices, further reinforcing the need to pay via BNPL to capitalize on the arbitrage opportunity. Kind of like how everyone pays with credit cards for the rewards.
- theandrewbailey 4y agoFor all the advice about taking a loan and investing the cash you would have spent, no one I know of does that. Secondly, you are supposed to invest money you aren't going to use for at least 5 years. That's a much longer horizon than most product purchases. Why? Sometimes stocks/real estate/crypto/etc. goes down. Have you checked the markets lately?
- bobkazamakis 4y ago>Secondly, you are supposed to invest money you aren't going to use for at least 5 years. lol. Supposed to?
- dang 4y agoCould you please not post unsubstantive and/or flamebait comments to Hacker News? It's not what this site is for, and it destroys what it is for. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- RC_ITR 4y agoExactly, no one you know does that because it’s actually sort of bad advice derived from how extremely rich people allocate capital. Normal people generally have to hold a certain amount of cash anyway since they do not have access to collateral-backed revolving lines of credit and because they can’t afford to lose money that they know they will need to send in the future. Unsurprisingly all the BNPL maximalists do not live under those constraints.
- rchaud 4y agoNot just the extremely rich. That's why HELOC exists. So people can take a loan out on the value of their home. I wouldn't want to do this just to have some extra cash to invest, but some do use this to say, pay for college tuition, assuming the HELOC rate is lower than the college loan rate.
- 1123581321 4y agoRegular people who save anything do that, but it usually looks like taking a loan instead of dropping their 401k or IRA contribution.
- deleted 4y ago[deleted]
- paulgb 4y agoOne snag of BNPL is that not all credit cards are accepted. When I tried it recently, I wasn’t able to use a Visa point card and had to use another low-points card instead. I didn’t do the math, but if you’re optimizing down to the yield from payment terms, you’re probably better off optimizing for points.
- tfehring 4y agoThey’re free but there’s an opportunity cost - by using BNPL you forego 2% or whatever in credit card rewards, so you’re effectively paying ~8% annualized for a 3-month term. My understanding is that the BNPL providers are effectively paying interest out of their merchant fees (in that they securitize and sell the debt for less than face value and rely on fees to make up the difference), so as interest rates go up I’d expect the terms to become less consumer-friendly.
- freemint 4y agoYou get credit card rewards? Greetings from Europe.
- kristofferR 4y agoCredit card rewards are quite stupid, though, as it obviously requires way higher credit card fees than if they weren't a thing. Customers just end up buying higher priced products and potentially getting the higher price difference back as rewards. In Norway a card transaction with the national system BankAxept costs 0,06% + ~$1 cent per transaction [1], in the US the fees are usually at least a percentage point or two. [1] https://vipps.no/alle-priser/bedrift/bankaxept-priser/ https://vipps.no/alle-priser/bedrift/bankaxept-priser/
- josephcsible 4y agoBut we do have some credit cards that don't offer rewards, and they don't charge any lower fees to merchants than ones that do offer rewards do.
- bigjimmyk3 4y agoAs a former merchant, this was not my experience -- I recall seeing a notable difference between fees on similar transactions, and the tracing those differences back to rewards cards.
- 4y ago
- nerdponx 4y agoShort term investing for 3 months though? Seems like a good way to lose money on fees, then also either lose money on the investment itself or have your gains eaten up by capital gains tax, not to mention the time cost of finding good short-term investments in the first place. Or am I misunderstanding? Because yes of course BNPL is a hell of a lot better than credit card interest.
- gruez 4y agoIf there's a steady amount of spend you can put on BNPL (eg. $1000/month), you can roll over that investment month after month, rather than constantly investing/cashing out. Alternatively, you can park that money in a savings account or similar, and count that towards your "bonds" allocation of your portfolio.
- Sebguer 4y agoMost of them aren't really zero interest.
- smugma 4y agoCredit cards give 1%+ cash back plus are interest free loans as well. You have 30 days to pay your bill and on average a purchase will be made 15 days into a billing cycle ie 45 days total. So BNPL is not a compelling offer for those who have good enough credit to have credit cards.