5 ms·

Because they're avoiding "credit" entirely. I suspect this is the start of their own implementation of "credit", and they're comfortable with losing some money

Because they're avoiding "credit" entirely. I suspect this is the start of their own implementation of "credit", and they're comfortable with losing some money at the beginning. In the long run, the traction they gain from the good customers could/should be worth more than the money they lose. For the consumer, $3 on $500 is incredibly low interest.

gojomo 15y ago
$3/month on $500 isn't 'incredibly' low: it's $36/year, on a net carried balance that's probably close to zero at least as often as it's close to the maximum $500. If you could time it just right, so that your balance was $499 29 days of every month, and $0 the one day that it needs to be, the effective rate would be around 7%, a fair but not great consumer credit rate. But if your balance is often closer to zero, and you ever trigger the late fee, the effective rate becomes much, much higher. It does compare favorably to foreign-ATM access fees.
- aidenn0 15y ago
  Find a charge card (not a credit card) that has an annual fee of less than $36 and a late fee of $5 or less. Now consider that Dwolla charges less to merchants as well.
  - encoderer 15y ago
    actually, if you have good credit, that's not a problem. I don't have any cards with an annual fee. in fact, they pay me, on average about 1.9% cash back per year. on the late fee, you're right. but the answer there is to pay in time. not really an issue.
    - nestlequ1k 15y ago
      The financial industry runs on the fact that a tiny fraction of people have good credit. They love people like you who morally justify gouging poor people by saying "well, it's your own damn fault for having bad credit". See also: http://www.cracked.com/blog/5-things-nobody-tells-you-about-being-poor/ http://www.cracked.com/blog/5-things-nobody-tells-you-about-...
      - encoderer 15y ago
        That conveniently glosses over the fact that it is your fault if you have bad credit. There are systemic causes of poverty. But nobody forces you to take credit you can't repay. More importantly, your premise is wrong: The average credit score in the US is just below 700 (690ish iirc.) And the median is above 700. This comes from numbers from the CRAs and is supported by the stats reported by CreditKarma.com. That is not bad credit.
    - anamax 15y ago
      > I don't have any cards with an annual fee. in fact, they pay me, on average about 1.9% cash back per year. How are you still getting that much? My 2% for everything and 5% gas/groceries cards went away after Dodd-Frank. I've still got 3% Gas and dining and 2% travel with the occasional special but the rest, the majority, is only getting me 1%.
      - encoderer 15y ago
        Grandfathered into the FIA (Formerly Charles Schwab) 2% visa signature card. But if you have a couple cards with the normal 1% plus rotating categories deal, you can get near 2% on average. Last I checked NASA FCU still has a 2% on everything card, and AARP has a great 5% on everything for an intro period.
        anamax 15y ago
        > Grandfathered into the FIA (Formerly Charles Schwab) 2% visa signature card FIA (nee Schwab) was my 2% on everything card but my account was sold to BofA, which changed the terms to 3% on gas, 2% on groceries, 1% on everything else. My usage dropped a lot with the sale, in part because my wife refuses to use anything BofA.
        encoderer 15y ago
        I received notice that there would be no changes to my account for the time being -- this was, oh, 6 months ago? I do know that FIA (formerly MBNA) is owned by BofA, and that accounts were being switched to the BankAmericard. Not entirely sure how criteria was chosen? For now I'm just enjoying it while it lasts.
- latchkey 15y ago
  Thank you for saying what I was just about to say. The real point here is that there is that no reason, for a responsible consumer (ie: someone who isn't running into debt each month), to use this 'service'. Since it is tailored to people who have good credit, I don't see how this is going to be popular at all.
  - betterth 15y ago
    Because the point is far more than just a credit line. The name is "instant". How exactly is everyone missing the entire "instant" part of the feature. Instant costs $3/mo, and includes the credit line feature. But the fronting of cash isn't the ONLY feature in 'instant', and thus not the only thing you're being charged for! I like the idea of instant transactions -- a lot. If I could use Dwolla instead of a debit card, you better believe I'd pay $3/mo to have all of my transactions post immediately.
  - pbreit 15y ago
    I think the service could find a niche in situations where credit cards are not currently accepted (I'm thinking larger dollar amount payments for professional services). And the instant feature would definitely be a bonus. I see it more like PayPal's instant transfer where PayPal fronts the money and then taps your bank account (which takes 2-3 days to complete). PayPal takes it a step further by covering a bounce with a credit card.
kfcm 15y ago
It is essentially a line of credit, sort of a cross between a term and demand loan I would guess (without more details of repayment terms). Many banks have something similar, only it's called "overdraft protection". Of course, as someone else has commented, with good money management, you don't need this.

gojomo 15y ago

$3/month on $500 isn't 'incredibly' low: it's $36/year, on a net carried balance that's probably close to zero at least as often as it's close to the maximum $500. If you could time it just right, so that your balance was $499 29 days of every month, and $0 the one day that it needs to be, the effective rate would be around 7%, a fair but not great consumer credit rate. But if your balance is often closer to zero, and you ever trigger the late fee, the effective rate becomes much, much higher. It does compare favorably to foreign-ATM access fees.

aidenn0 15y ago
Find a charge card (not a credit card) that has an annual fee of less than $36 and a late fee of $5 or less. Now consider that Dwolla charges less to merchants as well.
- encoderer 15y ago
  actually, if you have good credit, that's not a problem. I don't have any cards with an annual fee. in fact, they pay me, on average about 1.9% cash back per year. on the late fee, you're right. but the answer there is to pay in time. not really an issue.
  - nestlequ1k 15y ago
    The financial industry runs on the fact that a tiny fraction of people have good credit. They love people like you who morally justify gouging poor people by saying "well, it's your own damn fault for having bad credit". See also: http://www.cracked.com/blog/5-things-nobody-tells-you-about-being-poor/ http://www.cracked.com/blog/5-things-nobody-tells-you-about-...
    - encoderer 15y ago
      That conveniently glosses over the fact that it is your fault if you have bad credit. There are systemic causes of poverty. But nobody forces you to take credit you can't repay. More importantly, your premise is wrong: The average credit score in the US is just below 700 (690ish iirc.) And the median is above 700. This comes from numbers from the CRAs and is supported by the stats reported by CreditKarma.com. That is not bad credit.
  - anamax 15y ago
    > I don't have any cards with an annual fee. in fact, they pay me, on average about 1.9% cash back per year. How are you still getting that much? My 2% for everything and 5% gas/groceries cards went away after Dodd-Frank. I've still got 3% Gas and dining and 2% travel with the occasional special but the rest, the majority, is only getting me 1%.
    - encoderer 15y ago
      Grandfathered into the FIA (Formerly Charles Schwab) 2% visa signature card. But if you have a couple cards with the normal 1% plus rotating categories deal, you can get near 2% on average. Last I checked NASA FCU still has a 2% on everything card, and AARP has a great 5% on everything for an intro period.
      - anamax 15y ago
        > Grandfathered into the FIA (Formerly Charles Schwab) 2% visa signature card FIA (nee Schwab) was my 2% on everything card but my account was sold to BofA, which changed the terms to 3% on gas, 2% on groceries, 1% on everything else. My usage dropped a lot with the sale, in part because my wife refuses to use anything BofA.
        encoderer 15y ago
        I received notice that there would be no changes to my account for the time being -- this was, oh, 6 months ago? I do know that FIA (formerly MBNA) is owned by BofA, and that accounts were being switched to the BankAmericard. Not entirely sure how criteria was chosen? For now I'm just enjoying it while it lasts.
latchkey 15y ago
Thank you for saying what I was just about to say. The real point here is that there is that no reason, for a responsible consumer (ie: someone who isn't running into debt each month), to use this 'service'. Since it is tailored to people who have good credit, I don't see how this is going to be popular at all.
- betterth 15y ago
  Because the point is far more than just a credit line. The name is "instant". How exactly is everyone missing the entire "instant" part of the feature. Instant costs $3/mo, and includes the credit line feature. But the fronting of cash isn't the ONLY feature in 'instant', and thus not the only thing you're being charged for! I like the idea of instant transactions -- a lot. If I could use Dwolla instead of a debit card, you better believe I'd pay $3/mo to have all of my transactions post immediately.
- pbreit 15y ago
  I think the service could find a niche in situations where credit cards are not currently accepted (I'm thinking larger dollar amount payments for professional services). And the instant feature would definitely be a bonus. I see it more like PayPal's instant transfer where PayPal fronts the money and then taps your bank account (which takes 2-3 days to complete). PayPal takes it a step further by covering a bounce with a credit card.

kfcm 15y ago

It is essentially a line of credit, sort of a cross between a term and demand loan I would guess (without more details of repayment terms). Many banks have something similar, only it's called "overdraft protection". Of course, as someone else has commented, with good money management, you don't need this.