FICO to incorporate buy-now-pay-later loans into credit scores

What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?

Fixed payment schedule and no interest being charged.

For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.

BNPL is 0% interest over N months. A credit card is 20% APY over the total balance over minimum payment. And it's offered by my CC providers.

For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle).

It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe it's because I do pay it, and if I didn't there would be 200% APY or something.

Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?

- No application process. You are at a store's checkout page or sales kiosk and can sign up in a couple of clicks.

- No credit checks.

- Longer payment period - usually 2-3 months with no interest.

That’s not how BNPL works in its modern form with the third party companies. You pay late fees if you pay late. If you have a 3 month plan, they divide the payment into three equal installments and you pay it off.

The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report.

They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.

The seller benefits from the increased demand, the financier sells this as a service to the seller.

Ah yes, the big scam of offering zero interest unsecured loans to anyone without even running a credit check. These companies are bound to have big losses when things go south because they literally offer you free money.

I bought tons of solar panels with 24 month 0% interest CC for my DIY installation. Kinda makes entire system free. I wish BNPL were offering longer payment periods, few months is not worth the risk at all.

Subprime borrowers use BNPL a lot and often don't pay it all back. Extending the terms would likely mean Klarna and Affirm will make back less money before the loan defaults.

Yeah, I’m not sure if BNPL loans have changed in the last decade at all but the financiers make money on the people who don’t pay the balance by the end of the term. I’ve financed a couple expensive electronics when it made more sense in my younger days and the terms were such that if you don’t pay it off by the end of the term, you owed ~24% of the total bill in interest.

They are already having big losses.

A credit card is for gaining access to the electronic payment monopoly's network[1]. BNPL is explicitly a loan. Yes, a credit card transaction may effectively turn into BNPL if you fail to complete your end of the transaction in a timely manner, but that is a hindsight outcome, not the reason for choosing the method in the first place.

[1] Nowadays you can often also use the network with other methods, like a debit card, but those alternatives still aren't universally accepted like credit cards are.

Beats the pants off a payday loan.

The merchant pays a fee for it, and they do it to get a sale that they otherwise would have missed.

If you decide to save $25/mo for a $100 product, that is 4 months for you to change your mind, have an emergency suck up that money, or score a lower price by waiting for a sale. But for some segment of the population, they will close on a pay-in-4 right now instead of waiting, and that is guaranteed money.