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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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I disagree with them being a scam to incentivise people to spend more than they normally would. They definitely incentivise you to pay with a CC over cash or a debit card, but I've never felt like I should go spend more money in order to get CC rewards lol
Statistically, people spen more with a card than with cash. You feel the price less when you don't see anything physically leave you. It's one of the selling points of credit cards to businesses.
Maybe you don't because you're actually financially responsible. There are many people out there who aren't and get taken advantage of by these offers because they think they are actually getting a good deal. But really a $2 return on a $100 loan with 10% interest is just a $100 loan at 8% interest which is essentially what these rewards programs are when you break down the math. Many people can't control their CC spending habits and that's where these companies offering these easy to get loan make their money.