But yes, these plans (usually deferred interest) are designed to exploit people who are bad with money. They also usually go out of the way to hide how much you're racking up in order to maximize gain. This kind of person thinks "What's another $1000" when their bill is already at $4000. Furniture stores are infamous for this.
Well, only if you can earn more over 12 months than the asset you bought depreciated. I think a better way to look at it is that you can earn a small discount.
As a result, depreciation can be written off, I think, since I would argue if you do buy it and keep it you’ve gotten value from it even if it isn’t cash.
You can save money buying something, which in a spreadsheet may look the same but is very different.
https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=...
https://www.consumerfinance.gov/about-us/newsroom/cfpb-study...
https://files.consumerfinance.gov/f/documents/cfpb_buy-now-p...
https://www.sfgate.com/news/article/influencers-lead-Gen-Z-i...
https://www.cnn.com/2022/07/06/economy/buy-now-pay-later-bnp...
https://www.cbinsights.com/research/report/buy-now-pay-later...
(disclosure: I have submitted public comments to various regulators on the topic)
And if you do that with all your stuff (after all, why stop at your phone) your finances will be hella complicated. With all sorts of repayments being deducted at different days of the months, starting and finishing over time. I wouldn't want that. It's seems easier but it makes things more complicated.
Was totally a no brainer, and a no brainer.
However, they have changed the details in recent years. Prior to this it was an ordinary financing account. But now it is a Best Buy credit card account with a limit equal to the purchase price. This means that in the 1st month of the offer, you're at 100% utilization on that card. And this hurts your credit score. Not to mention it now has an annual fee with an interest rate potentially as high as 31.49%. And this is just too risky. Save your money, then buy what you want.
There was a heat wave and I bought an air conditioner yesterday using Affirm to smooth out the payments.
In fact I cut up all my credit cards about a week ago and plan to only use BNPL vs credit cards going forward if I’m in need of a loan.
Or if you really want to build better financial habits why even take loans every two weeks?
And the answer is because I am only 98% a rational human being. The other 2% is a weird vain conceited animal that doesn’t believe the future exists who wants shiny things and he wants them yesterday. I’m lucky my income has increased faster than my desire for more stuff, at least.
But to be fair, that number has improved quite a bit! In my 20s I was literally insane. Like, I took out student loans and lost all the money playing high stakes blackjack (Yes I realize that is absolutely insane).
At some point I realized the future is an actual place that really exists and have been trying to be more courteous to future me. Mostly after having children and not wanting them to live a horrible life because of me.
At least with Affirm or BNPL I know the exact terms and know it’ll be paid off in exactly a year. It’s much easier to reason about for my impulsive brain vs “loan that lasts forever from the credit card company and you pay absurd amounts of interest because you’re dumb”.
My mom declared bankruptcy twice so I’m still doing better than her but it’s hard to get an innate sense of “we don’t have the money for that” growing up in a household where if there was money in the bank it was spent ASAP.
On the bright side there’s more money in my 401(k) than I owe in debt, which is nice. I know the optimal strategy would be “contribute to the match then use the rest to pay off debts then increase” but I just don’t trust myself.
It’s like I’m in an eternal struggle with a rational me and an impulsive shopping spree dopamine seeking me, that just wants immediate gratification. Luckily it seems like with age the rational one is getting stronger.
Also I am always surprised when people don't treat CC expenses as they would cash...
CC interest has always been intolerably high to me. I totally get emergencies and now I am out money. I don't get rolling balances when that costs you like 2% per month.
It’s easier to fight back when the loan terms are explicitly laid out, “okay you’re getting a one year loan and it’ll be $1000 loan and $300 you’re going to pay in interest”. And I’m like “okay I’ll wait and just save up”.
The lesson I learned growing up with a single mom was “spend the money immediately or else stepdad will spend it on drugs, money is a liability, you’re better off having things, harder to pawn vs cash”.
And credit cards just makes that highly dysfunctional mindset that’s burned into my brain even worse.
It is the 25% APR that I think is a problem financially.
It makes more sense too, after all what really proves that you're good with money is when you've never needed borrow in the first place.
"Churning" cards like in the US is the best way to tank any chance of getting a mortgage here. They really prefer to see customers with a clean slate.
Buying a phone on a pay later scheme, even a normal mobile contact that's for a minimum duration will hurt it (and will reduce your available mortgage by more than the actual loan amount)
a CPI calculator says we've had about 25% inflation in the past 4 years, and my own basket of goods suggests it's closer to 50%. (For example gas in Texas has trough to peaked 300%, more like 200% on average). So I think the strategy might be a good one, albeit hard to get a ton of money behind (ie, I have yet to find a way to play it with $25k)
As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
> Compared to other BNPL schemes, this writer hasn’t found anything about late payment fees, debt collection, or charges that kick in upon non-payment of a scheduled amount.
I did 45 seconds of research and found Apple's official confirmation:
> Apple Pay Later doesn't charge any fees or interest, even if your loan account goes past due.
Affirm for example routinely sells past due debt to collection agencies. Has Apple said they won't do the same?
People are going to buy a new iPad whether Apple gives them an easier way to do it or not; the difference is with Apple’s Pay Later they’re only on the hook for the cost of the device, and not additional interest monthly on top of that.
And iPads are very resellable.
What are you talking about?
The point is that instead of laying the cash out upfront you can use that cash to generate income while you also have your valuable product you wanted to buy. Not sure why that’s hard to parse.
Many of the other 0% interest over 24 months hit you with all the accumulated interest at 30% if you don't pay off in full in that 24 months.
But that’s not what Apple is doing here.
And even if you do manage to pay everything on time, on average you're better off with a credit card (pay after 30-60 days, i.e. 45 days average, and get at least 1.5% cashback vs. pay in four installments over 6 weeks, i.e. 3 weeks average, and get no cashback).
Merchant fees for BNPL are also higher than they are for credit cards, as far as I know.
> As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
You can do the same with a credit card – you'll have at the very least 30 days to do so without paying a cent of interest. For most BNPLs, the first installment is due immediately at the time of purchase.
But that isn’t what Apple is doing, and the details matter.
Apple Pay Later lets you split a purchase into four equal payments over six weeks with no interest or fees; not years without a thought of paying it back. There isn’t even a hard credit inquiry, so it doesn’t hurt your credit.
The only fees of any kind associated with Apple Pay Later are insufficient funds fees or overdraft fees from your bank if you don’t have sufficient funds.
One day I saw him sighing over the credit line forms for some of the customers of that day and he explained that these things are almost always used by people who can't afford it. He'd had some people in trouble trying to bring the stuff back which of course he couldn't do. And the head office didn't care.
Better to stay away from this crap.
I guess it makes some sense because today's 1 buck is only worth 90 cents next year but nope I just buy my stuff outright, even cars.
The only thing I'd get a loan for is a house. I don't even have a credit card, the only reason I ever had one was that debit cards weren't accepted everywhere but that's long fixed.