Payments Processing is its own niche highly lucrative industry. And options to convince people to finance every fucking thing are largely just rent-seeking schemes intent on nickel-and-diming the transactions of the poorest people.
A lot of our financial fuckery is due to the fact that we have so many financially illiterate people, that companies can impose bullshit like this and get away with it. So in the end we all suffer because we can’t put financial pressure against said companies since they can wait us out, surviving on the stupid.
This applies to a lot of stuff, from streaming to the to fast food to groceries.
Most of the time, these come with zero interest. I’m not sure where the money is for the companies doing these finance options, but if someone did this for a joke, it’s not that big a deal.
$8 McFlurry likely has the financing baked into the price of the product.
You’ll occasionally see businesses (SPEC’s is the local shop that leaps to mind) that will give you a discount for using a debt card rather than a credit card. That’s because the credit card company tends to charge a 2-4% transaction fee on the purchase. SPEC’s can save money by offering to discount their merchandise by some portion of that transaction fee.
The reverse is also true. A retailer that works with Klarda or some other DeFi platform can simply raise the price of all its products to cover the (typically much higher) transaction cost.
This defers the credit risk (if there’s a 12% surcharge, you don’t mind when 10% of the bills go unpaid) in a system that is highly punitive for debtors and tax-favorable to creditors.
I looked into using this type of service to pay for a modest purchase. A luxury of sorts. Something I had the cash for, but felt weird about paying all $600 or so for. I thought, maybe an interest free loan would be cool?
So i start to pay for the thing with klarna or whatever. And I see it’s only a six week loan. Wait, my credit card is a free six week loan (give or take). Wtf. I’d have to pay the thing off faster than just using a credit card.
I’ve used similar services to this in the past; not because I couldn’t afford something up front - but because I wanted to amortise the purchase across a pretty short (8 week) period.
Why not just use a credit card? I did. As a semi-regular user of the service, it was set up in such a way that it would bill the first 25% of my purchase after 2 weeks, and again every 2 weeks after that.
So not only was I getting an additional interest-free time stacking the 2 week period with my CC’s billing cycle; but I was earning loyalty/rewards points with both programs simultaneously.
You can’t do that forever though. Eventually you’ll run out of credit and have to pay for it yourself. And by that point you’re probably getting crushed by the debt from a maxed out card, that you’d have been better off not using in the first place.
You are saying this like they are not aware… like telling a drowning person that if they don’t stop breathing water they’re gonna die. The point is that using credit in the first place isn’t always a choice. Just because it is for a lot, maybe even most people, doesn’t mean there aren’t a lot of other people for whom it isn’t.
Have you ever been poor? Yes, sometimes you need credit to live. I’m still paying off debt from 2020 that I only acquired due to desperation and the threat of homelessness
Not technically correct. If you want to be able to rent apartments or dream of owning a house, you will have to use credit in the U.S., or you’ll at least need someone with a high credit score willing to be your co-signer.
obv nobody is forcing you to get a credit card and rack up a lot of debt, but you will face a lot of struggles in life that someone who makes regular payments on a credit card will not.
That seems crazy to me. I understand that what you are saying is reality, but is it really that difficult to get by in US without ever owning a credit card?
Yes. Effectively you will not have any credit history, so you simply won’t qualify for lower interest credit products or will be rejected on applications that have a credit score threshold.
You’ll be rejected from a lot of things on the basis of having no credit, because in the U.S., it is considered worse if you have always paid everything up front and on time than if you consistently borrow and make continual payments. Now, that doesn’t have to be a credit card per say, it can be car lease payments, student loan payments, medical debt payments, my landlord reports my rent payments, but credit cards are one of the easiest ways to build up your credit score before you say, have to spend an extra $1500 upfront for an apartment on a co-signor service because my credit score wasn’t considered high enough for an apartment I pay $500 a month for.
Also, your credit cards are a different kind of “loan” - revolving - vs those other debts, which are installment. Having a mix of the two will improve your credit. They literally want it to be impossible to have good credit without the cards.
The first time I wanted to finance a car I discovered I have what’s called a “thin file.” My (interest free) student loan wasn’t reporting to all 3 agencies. I was able to get my dad to co-sign. I was 26. Discovered then that being told “never ever ever own a credit card” (by my dad!) was very bad advice. Get one with a low limit and use it to pay the same bill every month. Credit! Now other places trust that you pay your bills.
I’ve since gotten several cards (it’s been nearly a decade) and they each serve a different specific purpose. I purposely target high signing bonuses and my purchases are better protected. My limits are stupid high, which I guess is nice but I’ll never put that much on so it’s a bit pointless. Then again, knowing I have access to that if things ever become dire is nice.
They aren’t taken by force, you choose to live in a society that provides you with all sorts of services, which need to be paid for.
You are free to live in a society that doesn’t provide any road networks, fire departments, education, … but that is not where you live now. So I suggest you move instead of complaining about something necessary.
They make their money similar to credit card fees, a small percentage from the merchant.
They shaft you if you don’t pay though, and I’m not sure if this is still the case but they never used to show up on your actual credit history. Which seems nice on paper, but is actually hugely irresponsible. All these credit trackers seem like an unfair scam to keep the poor in their place, but they are there to stop you getting into more debt than you can pay off. If left to their own devices, the lenders would cheerfully give you way more than you could ever hope to pay, and then come round and break your kneecaps when you inevitably fall behind.
This might actually be a good way to teach kids about credit and interest. Let them borrow a small amount at a high interest rate and walk them through paying it off.
It’s one thing to tell them about financial responsibility. But watching a bad choice drain their piggy bank is the sort of trauma that leaves a scar.
Oh I don’t know if that was the reason for the one in the image. I agree with you that needing to finance ice cream is sad. I’m just thinking it could be a good intro to predatory finance for kids.
But its just literally feeding McDonald’s for no reason . Maybe the parents could rent money to kids in this way if you really wanna teach them that " lesson" for whatever reason .
The owners are Christian, but I think it’s disingenuous to call them far-right or extremists. Compare their activities to Chick-Fil-A, for example; they’re open Sunday and don’t donate to hate groups.
Maybe I misremember but I thought they went crazy during covid and got into the whole antimask nonsense and refusing to comply with health and safety rules.
I think this may not be a bad way to teach kids the dangers of compound interest, but only if you refund the excess interest afterwards because actually tricking your kid into draining their bank account in interest is a dick move.
You could just ask easily be the bank yourself and save the “interest” for a birthday gift or something later on. This really isn’t a difficult concept to use as a teaching opportunity without just screwing over a kid. Do you teach your kids to not walk into traffic by letting them get hit by a car too?
I mean, we’re talking about borrowing 10 bucks for buying McDonald’s here, I think they’ll probably be able to recover from that just a little faster than they would from getting hit by a car.
That’s why you let them think they lost a bunch of money for a few moments before giving it all back and telling them you love them, but that not everyone loves them in the same way and that real bankers won’t be so kind.
As long as you make sure your kids know that you have their back and you’ll support them through recovering from a setback like that, I think they’ll be fine. Paying them back to erase all the pain of the loss might set an unrealistic expectation because at some point, you won’t be there to bail them out anymore. Just don’t add insult to injury by making fun of them or blaming them for their mistakes.
I just use credit for everything and hover in the 820s. Unless there’s some substantial discount for paying cash I just don’t see the point these days.
That being said, my wonderful credit score ain’t doing shit for me. It’s not like I get some magical super low interest rate. Maybe when things calm down it’ll be worth it, but then there will be some other reason not to borrow money.
There are some nice perks to good credit outside of interest. It can qualify you for better housing, better perks on certain rentals, not having to worry about emergency situations killing your savings outright, and let’s you take advantage of stuff like cash back and bulk purchasing discounts. An example is staple foods, being able to hit the once-a-year bulk deals on stuff like rice or Lawreys garlic salt can cut the price of those items in half or better (personal examples, but the thought should hold). Ancillary perks, but they do add up.
“Credit Score” exists purely to sell you more credit score. It’s only there because they were forced to let you see your own credit history, and they figured “why not monetise that somehow”, so now you’ll be bombarded with ads for more credit and loans, which boosts your “score” while giving them a sliver in affiliate fees.
Actual lenders will examine your credit history, and apply their own score. The criteria for a phone contract, am unsecured bank loan, a mortgage, etc, will all have wildly different requirements. I have one credit card that I pay off each month, and that was enough to get a house.
Paying what you owe reliably is all they’re really looking for.
Credit cards come with fraud protection and help you build a credit score, which will get you a lower interest rate on a loan, if you need one. So long as you only spend money you have on hand, and pay off your card every month in full, there’s no down side.
is this a universal thing or are you just assuming that the entire world works like the US? Here in sweden i have never heard of anyone actually using a credit card.
The debt industry makes so much god damned money for the companies involved in it, it’s not even funny.
Between student loans and credit cards, US citizens have a collective $1.73 trillion in debt. And let’s just assume 15% interest on average (probably a low-ball to be honest): that’s $173 billion going to these companies in interest payments per year.
Shit won’t change here because too many people with too much power are making too much money.
In all fairness, it’s not exactly something people talk about - and for the record, I’ve never ended up paying any interest on the card. It’s just convenient, offering a layer of protection for charges, makes it easier for me to track spendings, and allows me to be earning interest on my paycheck by keeping it in a savings account until I need to balance the CC.
Add comment