the shadiness of pay-in-4 or other pay services that seem decent at first but are fucked up upon closer scrutiny

all purpose thread to talk about new emerging financial services that appear to be helpful but are a lot more harmful on closer look. i'm starting with Pay in 4s like Affirm, Sezzle, Klarna, Afterpay, etc.

PRO:

-They're interest free payments
-6-week repay schedule, so you're not locked into payments for a long time
-Convenient and able to use at checkout in-store and online

CON:

-This isn't like a credit card, where you're spacing out say a $5,000 purchase over many years. You're basically punting half of the cost to next month.

-Most people only factor in the upfront savings and don't factor in the pooled payment amounts they will be on the hook for the next month, so this often causes them to spend more

-Most of these apps require you to put a card on file for auto-debited repayments. Though you are legally allowed to revoke ACH authorization at any time, they often make this difficult or impossible to do on your own on the app (Sezzle and Klarna in particular). their representatives often don't know how to 'turn off' ACH authorization when you ask.

-If you take several pay-in-4 arrangements and default on them, when they get reported to Credit bureaus, they don't get reported as one delinquent balance, but several small tiny delinquent loans. However, Pay-in-4s aren't reported to credit bureaus if you pay on time (only conventional loans taken through these apps for like 3-6 months do). so they're a net negative.
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insert comments about your experiences with this type of service, OR talk about other emerging predatory financial gimmicks in the industry to look out for so that your fellow ILXOR can steer clear!

My only comment: "Sezzle"?

I have a cousin that uses these a lot who is on a fixed income… she ends up overspending… most of the places I see that offer these services are like “retail therapy” type sites, as opposed to sites that sell necessities, so they definitely enable compulsive shopping or whatever the current term is for people who buy a lot of things they don’t need when they are feeling down or anxious.

And on a similar topic… even though the same day/next day RALs got banned, there are still other services that can use people’s income tax refunds as “collateral” for advances with stupid fees … as a paid preparer, I get these advertised to me to offer my clients and I am like … fuck no.

I see a lot of "Buy this in four easy payments" screens when I buy things online; I'm never tempted, because I'm not in a position of financial uncertainty, but it's wild how the trap is just right there in front of you. It's almost as omnipresent as offers to bet on sports.

can someone explain how this is different than the "cash before payday" places? and what about that weird Dave app that I see commercials for on Hulu? so many of these weird "financial" apps, I don't trust any of 'em

consumer financing is a casino and the house always wins. zero-interest pay-in-4 financing is like free cocktails while you play roulette... immediate gratification, short-term euphoria, keeps you playing. longer you play the more certain it is you'll lose.

that makes sense, but what abt all these "money management" type apps? what's their rip-off angle?

happy to as I've sadly used them all! lol.....

ok so....Dave/EarnIn are a bit less skeevy than the traditional payday loan company, but come with some of the traditional problems. with traditional payday loans, states differ on laws, but it's easy as pie to find a loan company that will willfully flout those laws, to where my folks had sometimes 3 outstanding payday loans from an out-of-state lender while living in a state that only allowed one at a time.

Unlike those models, as well, there's no traditional loan fee with high APR, i.e. "$15 per $100 borrowed". But...they do get fees from you, in a more creative way - they attach fees to different methods of transmission and speed of service. So, on Dave, if you're willing to get their ExtraCash card and access your money from that, and wait 2-3 long days for it to arrive on that card, hey, you pay no fee! $100 in, $100 out.

But nobody chooses that, you're seeking these loans, you need the money immediately, and you want it in the bank that contains all of your recurring bills. So both of those things cost a fee. Is it as high as the fees a lot of the predatory payday loan companies charge? No. But they also ask you for 'tips' afterward to 'keep the lights on', and a lot of people feel guilted into giving them (I never do). I paid $6.25 in fees to 'express' a $125 loan, but if I gave a tip in the range they suggested, let's say like $8, well now I'd be paying a fee not that dissimilar from one of the other predatory companies!

Earn-In, on the other hand, grifts by giving you a limit you can borrow, but only allowing you to take a certain increment per day (i.e. $800 total, $100/day), and...the fees are per payment! So if you want your money right away, and it's $6 to expedite, and you take 3 payments in 3 days, then you feel guilty and you tip all three times, same thing there.

So...they're kind of borne of the same cloth, and the other reason people are right to be skeptical is because you have to hook up your bank to these apps via Plaid usually and they pore over your banking history to determine your spending/income and determine the amount you can borrow. Whereas you can usually walk in and pay a payday loan back in cash in these other places without having to allow that intrusivity in, though that might be ending even in the skeevier places.

ultimately though, payday loans are always a bad idea because you're spending money you don't have yet, and with these apps, you can borrow from several of them simultaneously, and most people don't have the skills to budget and miscalculate how much they truly have or lose track of how much they borrowed, and on settlement date, yikes!

I had to use these apps when things got hairy last year and before I started Chapter 7 but I do not recommend them unless you literally have no money and need it ASAP and it's a one-time thing because you are waiting on a big check and won't need it again. payday loans of this variety AND the old school variety fucked both my mother and father's finances and I couldn't shake them of the addiction to keep...fucking...taking them out.

a think a lot of the angles of these companies is some have membership fees (Cleo is $5 for basic and I think they have a premium one that's more expensive, Dave is $1, Earnin doesn't have one), some sell products....perhaps they get kickbacks for data mining too, not sure

you have to hook up your bank to these apps via Plaid usually and they pore over your banking history to determine your spending/income and determine the amount you can borrow.

holy shit, yikes

thanks for the overview!

anytime. I waded through the financial wilderness, maaaan

I have a friend who will always pick the instant transfer option from venmo which charges a fee … and I am like, the money hits your account tomorrow for free, why do this?

Don’t get me started on Venmo and PayPal practically trying to force you to buy cryptocurrency.

PayPal sends me an email a day, minimum, telling me I can buy crypto, or get a business loan through them, or do some other fuck-off bullshit.

Don’t get me started on Venmo and PayPal practically trying to force you to buy cryptocurrency.

Also if anyone knows the new intricacies of how to do friends and family payments from a business account, please share.

-Most of these apps require you to put a card on file for auto-debited repayments. Though you are legally allowed to revoke ACH authorization at any time, they often make this difficult or impossible to do on your own on the app (Sezzle and Klarna in particular). their representatives often don't know how to 'turn off' ACH authorization when you ask.

so this cropped up last night! I was helping my mother turn off Auto-debits for all of the gazillion stupid apps she borrowed money from, and all allowed it but one - Klarna. their reps will consistently say in chat that the Terms and Conditions require autopay for pay in 4 and so they can't turn it off. which is of course legally nonsense because, like with any financial agreement, you're always free to revoke your ACH authorization and stop making payments, and of course the consequences come with that (getting reported to credit bureau for non-payment, etc). The CFPB website includes instructions on this.

well, they won't listen when you tell them that. so I had to file a CFPB complaint (I also filed one for myself a while back when they did the same thing to me). but since they have like 15 days to respond it also requires doing things like putting new bank accounts on file that are closed, calling bank to say payments are no longer authorized, etc. maybe if enough people file this complaint they'll actually get a class-action suit filed against them but man...it just ain't worth it, don't use these apps!