Can someone explain these buy now pay later that aren't just a 0% credit card offer? Why do they even exist?
Why would the interest rate be different from someone making 2,000 a month trying to buy 1,200 $1 widgets?
There's all sorts of manufacturers that offer 0% financing. Presumably:
* A small cost in financing can dramatically increase their deal flow which makes the whole thing worth it.
* A lot of these deals have pretty punishing terms where if the customer can't pay on time, they get hit with all of the interest anyhow. Not sure if that's true of Apple's deal in particular.
Apple Pay Later did not include fees or interest for the establishment of the loan or for late payments. This made the offer unique in this space. https://support.apple.com/en-us/108419
However the compromise for such terms was a minimum purchase threshold of $50 and a maximum purchase limit of $1000 per sale, the requirement of a linked debit account (i.e. not a credit card), and Apple's ability to deny further Apple Pay Later purchases. Whereby the app simply didn't present the option.
For the merchants of high ticket items, it makes their product's more accessible to people with low-savings. So the merchant offers 0% rates.
Credit card payments have an average payment due date of 6 weeks (0-4 weeks until statement cutoff, 4 further weeks until payment due date without interest charges), no interest charges when paid within that timeframe, and offer around 1-2% of cashback.
BNPLs have 25% due at 0, 2, 4, and 6 weeks respectively, for an average due date of 3 weeks, and usually don't offer any cashback. In other words, you get half as long to pay back the loan and miss out on 1-2% of opportunity cost on top of that.
The fact that people still use them shows that either some consumers value other things more highly than just the strictly best deal from a financial point of view, or is a concerning piece of evidence of a lack of financial literacy (or both).