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EconomicsELI5 How do companies like Klarna and Afterpay make money without charging interest?(self.explainlikeimfive)
I see these companies offering installment payment options for online purchases but they don't charg...
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Idk how you could ever use these apps responsibly. Do they work for large payments, or just like a burrito or something?
These apps are no different from credit cards, if you use them responsibly. You simply spread the cost over several months without any additional fees. As long as you make the payments on time, you only pay for what the product costs, nothing more. There's probably a limit, but I'm not sure about the specific sum, and Klarna themselves don't say. I assume it depends on your credit score.
Credit cards often come with some kind of cash back or reward for using them. I'm guessing these apps don't have that?
Credit card cash back is never worth it anyway. It's usually something like 2% cash back but the interest rate is something like 10% or above after the first year of the card being active or there's no delay to interest to begin with. In the end it's a gimmick to get people to use the card more because they feel like they're getting a discount when really they are paying much more in interest that what they are getting back in rewards.
It's only not worth it if you're buying more stuff than you can afford lol
Yeah exactly, it's literally free money if you pay your cards off every month.
Yes which is a common thing for people to do lol
The US has absolute tons of people in it that are not financially responsible enough to use loans to their advantage.
These companies know they are giving loans out to irresponsible people but are only highlighting the benefits to them as a marketing tactic.
You can completely avoid interest on a credit card by paying the statement before the due date.
I’ve earned thousands in credit card rewards. Never paid a dime in interest.
In what world is 2% cashback not free money? Why do you pay credit card interest?