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1.5% back on the purchase via CC rewards beats earning 1% over 3 months (4% yield) in a HYSA every time, anyone using BNPL is using them suboptimally. For a 3
by quickthrowman 1y ago
1.5% back on the purchase via CC rewards beats earning 1% over 3 months (4% yield) in a HYSA every time, anyone using BNPL is using them suboptimally.
For a 3 month BNPL loan to be worth it, HYSA rates must be over 6%, and actually a bit more due to the time value of money; you get CC reward cash after the statement period but it takes 90 days (and up to ~120 days) to get three monthly interest payments.
- loeg 1y agoMaybe you replied in the wrong place? This isn't responsive to my comment.
- quickthrowman 1y agoNo, I was replying to your comment. Using a BNPL loan is less optimal than paying with a credit card due to the cash back rewards. People with good credit may use them, but it makes zero sense to do so. You always come out ahead by using a credit card and paying it off immediately unless the high yield savings rate is 6% or higher assuming a BNPL loan term of 3 months. Beyond that, it does make sense to use them, like Apple’s 12 month no interest on Apple products with the Apple Card.
- loeg 1y agoI don't think a discussion of optimality is relevant to what I wrote. Lots of people with good credit are not maximizing credit card rewards and sign-up bonuses, either. Humans are not homo economicus. (And just as a factual matter, there are sometimes longer BNPL terms than 3 months, which changes the math on what is "optimal.")