Rocket Mortgage has this commercial they run that shows some schlub walking into his house holding three bags of groceries while the voiceover talks about how it used to be six bags. Then the guy's house starts talking to him about how he could mortgage his small bit of equity ... and spend the money on fucking groceries. It's depressing to think about the level of financial illiteracy - not to mention desperation - that could lead somebody to go into debt for food. Not to mention the utter depravity of building a business around taking advantage of such people.
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Stores had layaway back in them days, it was OK. It wasn't super predatory as I recall. Capitalism will forever get greedier.
I remember layaway fairly well. The great thing was that there was a small fee at worst, no interest charged.
It really needs to come back. It’s far better than putting someone in interest laden debt. But debt is profitable.
Wasn't the whole point of layaway to keep the physical item from being purchased by another customer until you could pay it off? How many items today completely sell out?
Elder millennial, and I've never fully understood layaway.
Yeah, but that was back in the day when if you wanted some things they could take weeks or more than a month to have it ordered and shipped to you. It was all snail mail and next day prime delivery didn’t exist for the average person. Logistics and shipping were a lot slower. So if you paid layaway for a month you could get the double benefit of payments and not needing to wait for an order to come in. IOW you could save up for a month and then order and get your item a month after that, or “claim” an item now and make the payments.
Makes a lot of sense, thanks.
I'm Gen Z, I did a layaway on the 2 bikes (my ebike and my Kona Dew+) I've bought because I knew I would have enough money to fully pay for them soon, but I didn't want to risk those particular models selling out, and the bike shop really only brings in a few of each model due to their size.
People will never go back to not getting the thing up front plus then the store has to warehouse all of that stuff she the costs associated with staff looking after and organizing it, in a time when every place is slashing staff this will never do
But with layaway, you didn’t actually get the product until you fully paid it off right? Which I don’t think you can do with something perishable?
Yes, layaway was typically used for bigger purchases. It wasn't Klarna for a slice of pizza. And in the case of Costco, it seems that it is primarily targeted for big purchases.
But now we do have Klarna, for a slice of pizza. In the U.K., at any rate. It’s terrifying.
We still have it in Australia (called layby). I know some people who use it to buy larger Xmas or birthday presents way ahead of time and pay it off over many months.
Here are the rules and costs for Kmart for example: https://www.kmart.com.au/layby/
Agreed. I remember it being eminently reasonable. I bought a Wii and a laptop using layaway 15 years ago.
Now, we get Klarna, which will fuck you up if you can't make those payments in four weeks.
How is this different from their credit card?
Because it's even less regulated. Gotta "disrupt" them all!
"Move fast and break things"
BNPL splits the transaction evenly every other week or in some cases, every month. There's typically no interest or even fees in some cases (Zip)
BNPL can be good, it can also be as bad as any other debt can be.
Because they're typically interest free, it's essentially "free" money. For example, let's say you have a big purchase you want to make of $500, you can afford this purchase out right because you saved money for it. But you can also afford to have 4 payments of 125$ every 2 weeks direct from your paycheck.
It's better to take the split, and keep that 500 in savings for numerous reasons from generating interest to keeping it for rainy days.
Now ofc there's caveats, like everything there's nuance. Like every other type of credit, whether it's complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.
While there is no interest charged on your BNPL ... payment plan, micro loan, whatever you call it...
Making the payments on time does not help your credit scores. BNPL deals do not count as on time payments made, they don't count as an expansion of your total available credit, nor your current debt to total credit limit, number of accounts you have, etc...
But if you don't pay them, and you go into collections on them, now they massively hurt your credit.
And if you do, say, suddenly become very injured and miss work, can't make payments... well now you may have many, many, many defaults on all those different BNPL agreements.
Whereas, if the same thing happened, but you only had maybe 1 or 2 credit cards with larger total credit limits, well, that would still be bad for your credit, but probably not as bad as if you had ten or tens of concurrent BNPL agreements you'd been overlapping and chaining.
Also, I am not 100% sure about this, but I am fairly confident that, generally speaking, most credit cards will give you 3 months of missed minimum payments before they send you to collections, whereas BNPL agreements can be... twice a month, once a week, and can trigger giant penalties for you if you miss even one... and then those chain and they can send you to collections even faster.
Again, I'm not 100% sure about all of that last paragraph is totally correct, but... from a consumer standpoint, if you ever miss even a single payment, or a whole bunch of them... you're probably going to be more fucked if your 'loans' are via BNPL then via a or a few credit cards... and BNPL 'loans' are very, very obviously targetted at people who are more likely to miss one or a few payments.
It is extremely predatory.
Now ofc there's caveats, like everything there's nuance. Like every other type of credit, whether it's complimentary to your finances or devastating to it depends on your impulse control, financial literacy, planning and reasons for using that credit.
That's a lot of words to say don't spend money you don't have.
If you take the time to read what they're saying it's actually 100% logical to spend money you don't have in some cases.
Ex: getting a new mortgage on a house that's paid for in the middle of COVID while interest rates are super low to invest it at a higher % than the mortgage.
Again, nuance, you can take out debt for money "you don't have" as long as you can comfortably afford it
My 500 in savings was an example, but if you didn't have that saved up, there's nothing wrong with putting it on BNPL because again, there's typically no interest.
Functionally, there's not a whole lot of difference between splitting it into 4 125$ payments on your paychecks, or stashing 125$ from each paycheck to savings.
Biggest difference is committal, one way you are committed to paying that 125, the other you can skip if you need to (though there are BNPL services that do allow you to "skip" (read: defer) a payment without penalty) But again that goes back to an individuals financial literacy, planning, impulse control and security that you'll have your job the whole time
as long as you can comfortably afford it
Functionally, there's not a whole lot of difference between splitting it into 4 125$ payments on your paychecks, or stashing 125$ from each paycheck to savings.
There is, though. Spending the $500 you have in savings is an even exchange. Money for goods/services.
Spending money you don't have through BNPL means you're exchanging a 'promise to pay' or an IOU for goods and services. What happens if you don't pay on time? How much more than the actual purchase price will it cost?
My comment has nothing to do with who they target, just how you can properly take advantage of said service.
There is, though. Spending the $500 you have in savings is an even exchange. Money for goods/services.
Spending money you don't have through BNPL means you're exchanging a 'promise to pay' or an IOU for goods and services. What happens if you don't pay on time? How much more than the actual purchase price will it cost?
You need to re-read my comment again, I covered that already
As far as what happens if you don't pay, well, the exact same thing that happens when you don't make payments on any other type of credit
Except it's better than other predatory practices such as "Title Loans" because it's unsecured. So worst case scenario, your credit gets dinged for a while and you got to deal with debt collectors. That's a far cry from having your car repossessed or foreclosed on your home
This will be my last response to you, you clearly didn't even read the articles I linked. Who BNPL targets is directly related to the part of your original comment I replied to and the conventional wisdom of not spending money you don't have. Here's the relevant information from the article:
Credit score gives an indication of how disciplined a borrower has been in repaying his/her loans. Most traditional lenders like banks and non-banking finance companies (NBFCs) rely on credit score data before approving a conventional loan or credit line to a borrower. However, New-To-Credit (NTC) are those prospective borrowers who have never taken a loan, or any other credit line, hence, do not have any credit history that a lender can assess. So, for such borrowers the propensity to avail a credit option like BNPL remains higher and this is the reason they are the focus segment of BNPL lenders.
Most of these are either young consumers or people who do not have any formal credit line like credit cards or EMI cards for making payments. This is the reason why this group is most vulnerable to adverse impact of default on any new credit because of being unfamiliar with credit and the consequences of default. So, if you belong to this group you need to make sure you do not default on the payments if you opt for a BNPL scheme to make a purchase. Repayment of BNPL is tracked and reported to the credit bureau
BNPL offers short term credit through credit free period ranging from 15 days to 45 days after which the borrowers are required to pay the entire due amount. If you think that it's a small credit and hence any default will not have any consequences, then you are wrong.
Similar to any formal credit like a loan or credit card, the repayment track record of all borrowers using BNPL is reported to the credit bureaus. "BNPL which are offered in partnership with Banks and NBFCs. are reported to credit bureaus and repayment behaviour of the same impacts bureau score," says Anurag Sinha, Cofounder & CEO, OneScore, a credit score management platform. So, any complacency in terms of default may stick to your credit history which would not only bring down your credit score but could raise the cost of future credit steeply and in worst case it may also prevent you from accessing credit in the future.
While many traditional lenders may reject the borrowers who have low credit score, the chances of such borrowers getting credit through BNPL is higher because BNPL players depend on their internal assessment besides the credit score.
"Given the segment we target (lower income and self-employed), these households are often susceptible to disruptions in income that results in poor credit profile. These borrowers are not inherently risky and a lender needs to offer a product that is flexible from a repayment standpoint to ensure it is of maximum relevance. If the product is constructed the right way - these customers find it easy to manage their repayments," says Vishwanathan.
You want to talk about "how you can properly take advantage of said service" but in your example the only way to take advantage is if you already have the money. Spending money in a BNPL scheme when you don't increases your risk exponentially and one missed payment, one default, can follow you on your credit for years. This is why it's both relevant who BNPL is targeted towards and why "not spending money you don't have" is the best advice to give anyone about ANY credit scheme.
All the risks of late payment fees and harming your credit score if you miss a payment, with none of the beneifits of raising your score if you pay on time.
once i work this wiener off, then i can get to the buns!
Fucking TACO BELL has this in their app.....
Just Eat or Uber Eats do it as well.
Exactly one day after Jim Sinegal Dies:
Costco Hotdogs will never be more than $1.50.... A month, with the purchase of A Car.
Costco has Hotdogs, Costco also has 75 inch TVs...
Whatever happened to layaway?
If you have to buy a $1.50 hot dog on layaway, you've officially lost control of your life.