Comment by latchkey | Hacker News Reader

Comment by latchkey | Hacker News Reader

You pay $3/month for the privilege of allowing them to front you cash for up to a month. If you are late, they charge you $5. No broken legs, no threats, just $5.

According to one of the images 'simple terms apply'. What are those terms and why aren't they listed right now? That seems shady to make a big announcement and not clearly list all the terms.

I've got a few questions: How much cash can I borrow? What happens if I'm late multiple months? What prevents me from closing my account and just walking away?

I don't know, this seems like an awful idea to me. Rife for abuse. Dwolla will be one the receiving end of a lot of fraud really quickly and will be spending all their time and resources chasing down deadbeats.

UPDATE: A 3rd party has more details than their own site [1]. Up to $500. Still seems rife for fraud to me because now they are going to have to chase down a lot of people for only $500.

If my credit is good and my money management is sound, why would I need to pay $3 a month for the privilege of allowing me to get a loan for up to $500?

[1] http://www.siliconprairienews.com/2011/12/dwolla-introduces-...

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.

$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.

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.

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.

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-...

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.

> 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%.

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.

> 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.

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.

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.

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.

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.

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.

They should have focused on the merchant benefit and not the customer side of this launch. This change in my eyes is specifically to address the concerns of merchants that will not use Dwolla with the delayed payment system in place now.

I give them credit for trying to solve a merchant faith problem with a customer credit line. Someone that cant wait 2-3 days for money to be deposited in their account will probably not be the kind of person you would lend 500 bucks too, hence the 3 dollar fee, just sayin.

I was coming up with the exact same questions--and conclusion--as you while reading the post.

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