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Convincing people to finance their groceries is absurd. Ideally, everyone should have a few months’ worth of income saved. And if they do, there's zero reason t

by yreg 1y ago

Convincing people to finance their groceries is absurd. Ideally, everyone should have a few months’ worth of income saved. And if they do, there's zero reason to finance a burrito. In the Western world, if you have a job but no savings buffer, it’s usually not due to extreme poverty—it’s often a lack of basic financial literacy. Klarna, et al. market in direct opposition to that education.

twoodfin 1y ago
I finance all my burritos: It’s fantastically more convenient than cash, incrementally builds my credit rating, & I capture some of the efficiency surplus via rewards points. The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.
- mmillin 1y ago
  > incrementally builds my credit rating Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
  - margalabargala 1y ago
    > But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest. The person you replied to is doing exactly this.
  - SirMaster 1y ago
    Aren't most BNPL plans credit cards? How many credit card accounts are floating around out there compared to any other type of plan?
- justincormack 1y ago
  Its not an "efficiency surplus" that you get via rewards it is a monopoly surplus.
  - twoodfin 1y ago
    Not at all. If merchants wanted to ditch high-fee credit cards and spend the money they save on advertising or lower prices to win back the customers they lose as a result, they could do that tomorrow. Cash and debit cards are available alternatives. They don’t because it would be a worse use of their $$.
- tinodb 1y ago
  Not cash != credit. I haven’t paid in cash (except for a flee market) in years. Actually I rarely use anything but my phone to pay here in The Netherlands. But the notion that you’d need credit or a creditcard for that is absurd. And I think personal credit generally puts more people into financial trouble than that it helps.
  - int_19h 1y ago
    You don't need a credit card for this, in principle. But, given that credit score is a thing in US, and that buying things with a credit card and consistently paying the balance off increases it - but no interest accrues until the end of the cycle - it creates a strong preference for credit cards in practice. I do agree though that in practice this (pervasive use of credit cards) is one of the major contributors to indebtedness. Because you don't have to pay off that balance entirely, it becomes a psychological trap for too many.
robocat 1y ago
> everyone should have a few months’ worth of income saved Do you have any friends that earn minimum wage? Do you understand the societal incentives that discourages saving anything? Have you seen what happens to minimum wage earners when they try to save? Our society enables a few different niches before retirement age: #0: out of work. Discussing this niche be dragons. #1: $0 balance - spend money as you get it. Discourage savings by training people that saving doesn't help them (fines, thresholds, societal expectations). Can spend ~2 hours wages on pleasure for your 40 hours work. If you care for kids or elderly parents then expect to spend most of your spare money or time on them. Make sure that society blames the $0 workers for their state by saying "if they only did action Z then all their problems would be solved!". Society doesn't really encourage action Z. #2: working to pay off mortgage. Requires tenacity, skills and often luck. Society makes the jump from #1 to #2 very difficult. A mortgage is one of societies ways to force savings. Those savings often taken away later in western societies (through different ways, including demographics, illness and means testing). Need to avoid: https://www.astralcodexten.com/p/come-on-obviously-the-purpose-of https://www.astralcodexten.com/p/come-on-obviously-the-purpo... My two examples are: A) a friend working 40 hours, gets 1 hour wages (~$20) to spend on themselves after their bills (they don't buy tobacco or gamble, they might spend their $20 on beer). Not academically smart, spends any windfall money on unnecessary stuff. No car. Now retired. I'm not sure what society could have done to encourage them to become financially savvy? B) single friend on benefit to bring up kids. Missing partner little help. Government applies thresholds to income or savings that heavily discourage both. They were good with money before kids. Most spare money spent on kids. Also spent some money on unnecessary stuff like new carpet or societaly encouraged addictions (smoking and wine). Couldn't spend money on many necessities (didn't find much time or $ spare). Old crappy car. Now kids are grown, they are working and much better with their money again. As a financially sensible person, I'm unsure how I could have taught either to be better off financially. Their societal incentives were not aligned with that goal. Others might say they lacked the skills or lacked the drive. I suspect they both have ended up being better off by not chasing financial savings. The weirdest part is that I have wealthy friends that are not making better decisions. I'm not sure what the root cause of wealth differences actually are. Context: I live in New Zealand, and I am a financially well off middle aged guy.
- 1y ago

by yreg 1y ago

twoodfin 1y ago

I finance all my burritos: It’s fantastically more convenient than cash, incrementally builds my credit rating, & I capture some of the efficiency surplus via rewards points. The article makes the point that BNPL packages up almost the same product into a bite-sized, low-risk (for both the borrower and the lender) package, making it available to everyone. Indeed, that does sound like a good thing.

mmillin 1y ago
> incrementally builds my credit rating Most BNPL plans are not reported to credit agencies and therefore don’t build credit. But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest.
- margalabargala 1y ago
  > But “financing” by paying with a credit card and paying the balance in full would build your credit, still with no interest. The person you replied to is doing exactly this.
- SirMaster 1y ago
  Aren't most BNPL plans credit cards? How many credit card accounts are floating around out there compared to any other type of plan?
justincormack 1y ago
Its not an "efficiency surplus" that you get via rewards it is a monopoly surplus.
- twoodfin 1y ago
  Not at all. If merchants wanted to ditch high-fee credit cards and spend the money they save on advertising or lower prices to win back the customers they lose as a result, they could do that tomorrow. Cash and debit cards are available alternatives. They don’t because it would be a worse use of their $$.
tinodb 1y ago
Not cash != credit. I haven’t paid in cash (except for a flee market) in years. Actually I rarely use anything but my phone to pay here in The Netherlands. But the notion that you’d need credit or a creditcard for that is absurd. And I think personal credit generally puts more people into financial trouble than that it helps.
- int_19h 1y ago
  You don't need a credit card for this, in principle. But, given that credit score is a thing in US, and that buying things with a credit card and consistently paying the balance off increases it - but no interest accrues until the end of the cycle - it creates a strong preference for credit cards in practice. I do agree though that in practice this (pervasive use of credit cards) is one of the major contributors to indebtedness. Because you don't have to pay off that balance entirely, it becomes a psychological trap for too many.

robocat 1y ago

> everyone should have a few months’ worth of income saved Do you have any friends that earn minimum wage? Do you understand the societal incentives that discourages saving anything? Have you seen what happens to minimum wage earners when they try to save? Our society enables a few different niches before retirement age: #0: out of work. Discussing this niche be dragons. #1: $0 balance - spend money as you get it. Discourage savings by training people that saving doesn't help them (fines, thresholds, societal expectations). Can spend ~2 hours wages on pleasure for your 40 hours work. If you care for kids or elderly parents then expect to spend most of your spare money or time on them. Make sure that society blames the $0 workers for their state by saying "if they only did action Z then all their problems would be solved!". Society doesn't really encourage action Z. #2: working to pay off mortgage. Requires tenacity, skills and often luck. Society makes the jump from #1 to #2 very difficult. A mortgage is one of societies ways to force savings. Those savings often taken away later in western societies (through different ways, including demographics, illness and means testing). Need to avoid: https://www.astralcodexten.com/p/come-on-obviously-the-purpose-of https://www.astralcodexten.com/p/come-on-obviously-the-purpo... My two examples are: A) a friend working 40 hours, gets 1 hour wages (~$20) to spend on themselves after their bills (they don't buy tobacco or gamble, they might spend their $20 on beer). Not academically smart, spends any windfall money on unnecessary stuff. No car. Now retired. I'm not sure what society could have done to encourage them to become financially savvy? B) single friend on benefit to bring up kids. Missing partner little help. Government applies thresholds to income or savings that heavily discourage both. They were good with money before kids. Most spare money spent on kids. Also spent some money on unnecessary stuff like new carpet or societaly encouraged addictions (smoking and wine). Couldn't spend money on many necessities (didn't find much time or $ spare). Old crappy car. Now kids are grown, they are working and much better with their money again. As a financially sensible person, I'm unsure how I could have taught either to be better off financially. Their societal incentives were not aligned with that goal. Others might say they lacked the skills or lacked the drive. I suspect they both have ended up being better off by not chasing financial savings. The weirdest part is that I have wealthy friends that are not making better decisions. I'm not sure what the root cause of wealth differences actually are. Context: I live in New Zealand, and I am a financially well off middle aged guy.

1y ago