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Incentivizing people to go into debt for a depreciating asset with no penalty was not a sustainable idea to start with.

by mgh2 2y ago

bequanna 2y ago
Credit cards are still alive and well and are primarily used for consumable/depreciating products.
- nicce 2y ago
  They can usually sell the debt for companies, which are very good at collection debts. One reason to not do chargeback unless absolutely sure that it is valid.
  - lxgr 2y ago
    Not sure I see the relation between chargebacks and issuers selling off bad debt: Chargebacks are either paid for by the acquiring merchant or the issuer; in both cases (if accepted by the issuer), they extinguish the cardholder's debt to the issuer.
Menu_Overview 2y ago
Why isn't is sustainable? Bad for customers, good for credit comapnies, but it isn't any different from other kinda of credit card debt, is it? I considered it a few times, but like, it only spaced the payments out over 6 weeks and I had to unfreeze my credit report so...it wasn't a big win.
- mgh2 2y ago
  What is the collateral if they don't pay? Cc has interest rates and credit scores.
  - gruez 2y ago
    >What is the collateral if they don't pay? It's unsecured, just like a credit card. >Cc has interest rates and credit scores. AFAIK BNPL products either change interest directly to the consumer or is subsidized by the merchant. There's also a credit check prior to it being granted, so it's not like they're handing it out to just anyone.
hot_gril 2y ago
"Apple emphasizes in its statement that its focus is on the new installment loan features coming to Apple Pay later this year. These features will be available in multiple countries around the world. Apple Pay Later, meanwhile, was only ever available in the United States."
lxgr 2y ago
Only when there are interest charges. If there aren't (as is also the case for credit cards paid off immediately in many countries), and merchants don't offer any other incentives for doing so, why should I pay them upfront? Quite often, I'm not even receiving goods or services at the time my payment method is charged, so in the end it would be me giving the merchant an interest-free loan! Letting customers try out the merchandise, potentially swap for a different size of clothes etc. can be a win-win.
- tcmart14 2y ago
  I don't think applies to the Pay Later. But when you look at the Apple credit card, you can finance a, lets say, Macbook Pro for 12 months interest fee with monthly payments that, if made on time, will pay off the device in 12 months. Couple that with Apple high yield savings. If you have the cash to pay for the device, why not chuck the cash into Apple's high yield savings, earn 4.4% APY and just make the interest free monthly payments?
  - lxgr 2y ago
    If there's an even longer term interest-free loan, of course I'll usually take it! BNPLs are decidedly not that, though – see here for some back-of-napkin math: https://news.ycombinator.com/item?id=40711149 https://news.ycombinator.com/item?id=40711149
    - tcmart14 2y ago
      For sure, the BNLP is no where near as good at the credit card deal. In the apple specific case with the apple card, you'd be leaving the 3% cash back on the table where as the links shows, you won't get that with the BNLP. Which for a $2,000 MBP with 3$ cash back, you'd get $60 on the cash back making the device effectively $60 bucks cheaper. And a little more cheaper if you put the cash in the HYSA. My guess to answer the question at the bottom of your comment you linked. Its a mix. For some, its a lack of financial literacy. For others, its not being bothered with other options and taking the first option thrown in their face (even unaware that better option exists). Which in Apple's case, seems like a perfect way to push their credit card, and can use that to push it harder. Why even bother with BNLP when there is a better option. I also imagine Apple benefits more from the credit card than they do their partnerships with Affirm. But that would just purely be a guess.
michaelt 2y ago
Phone companies have been letting poor people pay for a $1000 iphone with 36 monthly payments of $50 for years. I know it seems like an absurd business proposition, but apparently they're able to make it work.

Incentivizing people to go into debt for a depreciating asset with no penalty was not a sustainable idea to start with.

by mgh2 2y ago

Incentivizing people to go into debt for a depreciating asset with no penalty was not a sustainable idea to start with.

bequanna 2y ago

Credit cards are still alive and well and are primarily used for consumable/depreciating products.

nicce 2y ago
They can usually sell the debt for companies, which are very good at collection debts. One reason to not do chargeback unless absolutely sure that it is valid.
- lxgr 2y ago
  Not sure I see the relation between chargebacks and issuers selling off bad debt: Chargebacks are either paid for by the acquiring merchant or the issuer; in both cases (if accepted by the issuer), they extinguish the cardholder's debt to the issuer.

Menu_Overview 2y ago

Why isn't is sustainable? Bad for customers, good for credit comapnies, but it isn't any different from other kinda of credit card debt, is it? I considered it a few times, but like, it only spaced the payments out over 6 weeks and I had to unfreeze my credit report so...it wasn't a big win.

mgh2 2y ago
What is the collateral if they don't pay? Cc has interest rates and credit scores.
- gruez 2y ago
  >What is the collateral if they don't pay? It's unsecured, just like a credit card. >Cc has interest rates and credit scores. AFAIK BNPL products either change interest directly to the consumer or is subsidized by the merchant. There's also a credit check prior to it being granted, so it's not like they're handing it out to just anyone.

hot_gril 2y ago

"Apple emphasizes in its statement that its focus is on the new installment loan features coming to Apple Pay later this year. These features will be available in multiple countries around the world. Apple Pay Later, meanwhile, was only ever available in the United States."

lxgr 2y ago

Only when there are interest charges. If there aren't (as is also the case for credit cards paid off immediately in many countries), and merchants don't offer any other incentives for doing so, why should I pay them upfront? Quite often, I'm not even receiving goods or services at the time my payment method is charged, so in the end it would be me giving the merchant an interest-free loan! Letting customers try out the merchandise, potentially swap for a different size of clothes etc. can be a win-win.

tcmart14 2y ago
I don't think applies to the Pay Later. But when you look at the Apple credit card, you can finance a, lets say, Macbook Pro for 12 months interest fee with monthly payments that, if made on time, will pay off the device in 12 months. Couple that with Apple high yield savings. If you have the cash to pay for the device, why not chuck the cash into Apple's high yield savings, earn 4.4% APY and just make the interest free monthly payments?
- lxgr 2y ago
  If there's an even longer term interest-free loan, of course I'll usually take it! BNPLs are decidedly not that, though – see here for some back-of-napkin math: https://news.ycombinator.com/item?id=40711149 https://news.ycombinator.com/item?id=40711149
  - tcmart14 2y ago
    For sure, the BNLP is no where near as good at the credit card deal. In the apple specific case with the apple card, you'd be leaving the 3% cash back on the table where as the links shows, you won't get that with the BNLP. Which for a $2,000 MBP with 3$ cash back, you'd get $60 on the cash back making the device effectively $60 bucks cheaper. And a little more cheaper if you put the cash in the HYSA. My guess to answer the question at the bottom of your comment you linked. Its a mix. For some, its a lack of financial literacy. For others, its not being bothered with other options and taking the first option thrown in their face (even unaware that better option exists). Which in Apple's case, seems like a perfect way to push their credit card, and can use that to push it harder. Why even bother with BNLP when there is a better option. I also imagine Apple benefits more from the credit card than they do their partnerships with Affirm. But that would just purely be a guess.

michaelt 2y ago

Phone companies have been letting poor people pay for a $1000 iphone with 36 monthly payments of $50 for years. I know it seems like an absurd business proposition, but apparently they're able to make it work.