Why I'll never use Affirm again(gist.github.com) |
Why I'll never use Affirm again(gist.github.com) |
A chargeback to Affirm sounds like a bureaucracy nightmare, couldn't the op contact Affirm and get them to chargeback the merchant? Do they have a procedure for this?
That said, Affirm exhibited terrible customer support and for that they should be held accountable.
When a merchant gets a charge disputed, they may not know about the dispute for many days. Then, if the customer lifts the dispute, the banks most often continue to hold the funds, and not release any information to the merchant for 90 days.
It's horrible for merchants and customers.
Then there’s buyers who just use chargebacks as a way to get free stuff. Buyer asks for a refund, seller asks for it back (even offering to pay for shipping), buyer says no and issues a chargeback.
I worked at one indirectly that was part of a major bank.
They used to even have local branches (stores in Wells Fargo parlance).
Citi, Wells, etc so had them back in the day before they were shamed into shutting them down.
Financing small purchases is just bad financial hygiene.
The story of pretty much EVERY startup. What will it take to get these clowns to focus on customer service and properly build out infrastructure? How much is enough fintech recklessness?
Simple: Regulations with teeth.
There's a reason why this kind of service isn't popular in Europe - not just are us Europeans more averse to debt in general and our banking doesn't rely on paper checks (which eliminates payday loan services and other check-associated bullshit), but one of the core benefits that the EU provides to its citizens is consumer protection. The EU parliament doesn't have much else under its authority which is immediately visible to every consumer, so they put in an extra effort to make life in the EU easier.
Affirm is a unicorn and IPO'd in 20221. It has quite a few competitors in the BNPL space like Klarna and Afterpay. So far they all lose a lot of money.
I had a similar experience years ago with Comcast/Xfinity and found many others who did too since. (/VIN-DI-CATION!)
I had a couple cases where in one situation bank and another a business claimed I owed them and it would show up on my credit report. I didn’t pay either.
North ever showed up.
I have, however, seen Affirm's other scummy side -- they have a special 'workflow' with a partnership with Katapult, a lease-to-own provider, where the merchant can take an Affirm denial and push it to Katapult for an even more predatory rent-to-own loan at higher rates.
Then why did you bother using a pay later scheme for a few hundred dollars on some sketch retailer?
This is like the person that chose to walk down a dark alley in a large unfamiliar city and can't believe they got mugged.
To put it another way, if you don't take advantage of 0% APR financing, you are effectively paying a surcharge to not have to deal with the additional complexity/risk of investing/financing/dealing with credit agencies. It's not clear to me at all you are getting your money's worth as a result of paying that higher price.
Fractional reserve banking is slanted to benefit people who take out debt and companies like Affirm allow somebody who may not be in the market for a Home or a Car to leverage their creditworthiness. Not using your available credit is not much different than keeping your cash under your bed instead of in an investment vehicle. People are just responding to the incentives created by central bankers and do bizarre yet rational things like take out loans for things they can afford out of pocket.
Which pays less than 1% APR. Over six weeks. On a purchase of $271. Congratulations, you saved 31¢.
Everything else is based on some imagined harm that might or might not come to you or some other imaginary person at some point in the future.
I used to get worked up about stuff like this but now I ignore it and my credit is pretty much perfect still. My mental state is much improved.
I might be not understanding the situation completely though.
They threatened to report this to a credit rating agency. At any given time it's probably not a big deal assuming 1) you don't need to replace your car or sign a lease or get a personal loan around that time and 2) you know that you can dispute negative marks on your credit report and you know how to do that.
I didn't know how to do that until I had my identity stolen and I'm definitely more credit savvy than most from my cc churning days
Also, credit scores are used now for some job applications. You can’t get some jobs without a good credit score. If you refuse to sign a waiver allowing the potential employer access to your credit score, you forfeit the job. Such jobs are often in the financial sector where employers want to make sure you do not have an incentive to steal.
or 3) it's just a bluff or 4) they do this all the time and the hit is so minimal that it won't even register, because of Affirm's disrepute.
What? How are they in business, then? Is this just the reverse side of "the market can stay irrational longer than you can stay solvent"? (I'd assumed they ended up being profitable off of people not paying things off in the 0% time)
I believe it usually does get removed immediately, but temporarily, until the credit reporting agency (CRA) has come to a decision on the case.
I've heard of folks closing on mortgages soon and out of nowhere, a past dispute winds up on their credit report as a negative item, putting the mortgage closing at risk. So they immediately dispute it to resolve the issue in the short-term.
Not worth the headache in any case. This is a tool to allow poor people to get even more in debt.
I'd think if you paid affirm and the merchant hadn't shipped the item, then your recourse would be to go to Affirm, not your credit card you used to pay affirm.
Your arguement is that Affirm should be able to clip the ticket and hold no responsibility for their client fufilling their duties?
The charge back goes to who you paid for a service, if they need to pass it on, it's for them to do.
So here you'd have to contact the seller, as the other party merely gave you a credit with hopefully good terms
I think the loophole here is Affirm not being regulated like a CC. Then they'd be required to arbitrate the dispute between OP and the merchant.
Yes, and that's why the payment to the retailer should have been the one in dispute, not the loan payment to Affirm. This is how it always works when you finance through a third party... it works the same way for a car loan, a mortgage, a credit card, etc.
That window generally starts counting down once the original transaction has completed in it’s entirety, which means you’ve received the goods (until you get the goods or services only one half of the transaction has completed).
If the merchant doesn’t deliver, then there is no limit on the chargeback period, assuming you’ve made a reasonable attempt to chase the merchant and got nowhere.
I think that's Affirm's wheelhouse, providing smaller merchants of largish ticket items an easy way to do financing. So OP may not have had an option outside of Affirm to do the financing.
I'm not sure how much Affirm would care about the issue as they're pretty much a 3rd party to the entire situation. But, yeah, I think the order of operations here would be: call merchant, call Affirm, then call credit card.
https://www.reddit.com/r/Mattress/comments/ejx6za/my_casper_...
I guess it would have been smart for OP to think of that purchase as an attempt to get that item from that merchant, and just to eat the $ rather than spend a lot of time and get their credit dinged. It isn't totally different from getting a physical mattress that may or may not work, especially since they eventually did ship the item. Actually, if the mattress caused back pain and I had to go through the trouble of disposing it, that would be worse than getting nothing.
I don't believe charging back the loan provider had any outcome to getting their product/service.
Affirm was the wrong target.
Basically, the vendor said it shipped me the product but never did. However, it gave PayPal a tracking number which was for something delivered to my town. I waited several months for the vendor to make things right.
I asked PayPal and the person said there is nothing it can do. I did a charge back and the bank gave me my money back.
So no, screw the vendors and screw the payment processors. I don't owe them anything. It is their responsibility to do things right or get a charge back.
Please email me at max.levchin @ affirm.com with either the transaction ID or the email address you used to register, and I will track down exactly what happened here. I realize you may not care at this point, but I’d greatly appreciate it, as it will help us prevent poor customer experiences.
Thank you. —Max
But the chargeback doesn't erase your debt with the merchant, so they are free to collect that debt by other means, including sending it to a debt collector.
Adding a third party like Affirm makes this messier - Affirm (presumably) fulfilled their service, they let you finance the debt and they paid the money to the merchant
Their email to me saying they would be materially disadvantaged and blah blah blah got met with a response telling them to fuck off, stop emailing me and that I was reporting them to my bank for merchant fraud (which I did).
Problem solved. It's all fun and games until they risk losing their ability to process credit cards.
When a problem happens, it is "nobody's" fault. But your credit gets destroyed though.
Affirm might well be correct that the bank has not really resolved the chargeback despite what Chase is telling him.
Under the hood raising a chargeback means your bank send the acquiring bank a message (with an exponent and evidence) that immediately reverts the original transaction and transfers money from the acquirer to the customers bank.
The merchant via the acquirer can then issue a message that does the opposite, again with an explanation and evidence. Eventually the card network steps in and makes a final decision, but they charge a significant fee to do this, strongly encouraging the parties to resolve the situation between themselves.
More importantly there is no “win” message or “give up” message. Instead there’s a set period of time each party is allowed to send a reversing message, after that time period the last person to send a message “wins”.
The periods of time involved are significant, ranging from 30 to 90 days depending on where in the process you are. As a result the bank could well say they’ve given up on the chargeback, and allowed the merchant to win. But the merchant can’t be sure of that until the countdown timer on a reversal has expired.
To make things even worse, most bank employees have no idea how payments actually work. They may well be looking at a tool that says they’ve “reversed” the chargeback. But under the hood that could just mean their system won’t send any further messages, allowing the other party to eventually win.
I would suggest writing a letter to Affirm’s legal department describing, very calmly, that Affirm has, apparently knowingly, threatened to send a report to a credit reporting agency despite the fact that Affirm is aware that no actual unpaid debt exists, and that, should this actually occur, you may seek to recover damages under the FCRA.
I don’t like doing it, but that works pretty well to get things moving.
Credit cards already give you a 30-day grace period before purchases start accruing interest. Using Affirm to extend that to 42 days seems inconsequential.
It seems like their target customer are people bad with credit, which would make them predatory.
Also, after reading this account I would be very hesitant to go through Affirm for anything. Chase seems responsive on the other hand.
For direct merchant/service provider purchases. Different beast than an installment loan, legally speaking. Regardless of Affirm botching things after the loan was paid, I suspect that the party reversing and withholding payment on the loan was taking a contractually and legally indefensible position.
This write up looks like a great argument to just try and work through the system first.
People in the poverty class are concerned with budgeting decisions to reduce their consumption as much as humanly tolerable. Reducing consumption is a game of psychological warfare between your future self and your present self.
The smart financial play is irrelevant to someone who needs to be making budgeting plays. Cheap credit leads to good financial decisions and bad budgeting decisions.
The sad truth is that looking poor in the US is culturally frowned upon, which often drives people to overextend their credit in order to fit in. People are quite often encouraged through advertising to improve their status through consumption in the short term at the expense of the long term. It's heinous, but that's America for you.
I really agree though, buy now pay later seems like a huge fiscal trap. Employment is at will and you have no guarantee about what tomorrow holds so it's good to try and live within your budget whenever possible... this doesn't really go for housing and the like though since those costs are so astronomical you're going to be gambling with debt no matter how long you save first.
This is a right approach. I wish more people know about this.
Just like with high cashback credit cards, they have large merchant comissions, that in the end have to be covered from the other customers to show only a single price.
I end up subsidizing other customers by a tiny amount, and just wish for regulation to stop this micro-theft.
Chargebacks against Google can cause your Gmail to get banned, chargebacks against Valve can cost you your entire Steam library. It's plausible legal action could reverse these behaviors, but unless you're prepared and funded to go that route, don't do chargebacks.
What I've learned is that the U.S. payments infrastructure is quite far behind, it's complicated, and frankly makes building with it more difficult than it should be.
For example. There's this new (as of like 2017 iirc) payment rail called Real Time Payments. Think "ACH transfer" but in <10 minutes 24/7 instead of 3-5 business days.
It's advertised as 24/7 however banks are actually allowed to go offline from 3am - 6am on Sundays (it may be once a month, memory is a bit fuzzy). So if you initiate a payment to a payee who's bank is offline, the payment is "rejected". So now you have to tell your customer "hey sorry, the payment has been rejected, it's not actually going to be available for a few hours".
Also there's no centralized way to tell when banks are down and as far as I know, there was no system built to track which banks are down and which are not. So if you want to avoid sending payments to a bank that's offline, you need to look at the history of payments to see for recent reject codes, have a direct line of communication with the banks, or use a third party API which probably does one of the prior mentioned things.
There's also some fun (sarcasm) edge cases in the state machine for a payment and there's a state of payments where it's said to be completed but actually the payment is in limbo and hasn't been received.
Remember, this is a payment system that was released in the last 5-10 years. Also, only ~70% of banks are onboarded to this payment rail so you have to look at payment destination routing numbers to validate if it's an option or not.
I mention all of this to try and convey the complexity and difficulty of working with the U.S. payment rails directly. I don't know if charges applies in the same manner, but I bet it's just as complicated.
With that said, this is Affirms bread and butter for their business. They should be aware of these things. Build the tools to enable their support team to do their jobs and help customers.
p.s. can't forget that ACH transfers are built to be done in batches for business hours only. That's a whole other topic.
How true that second claim is and whether Affirm is merely yet another predatory lender, I will leave as an exercise to the reader.
Here's a good deep dive on the BNPL model from Bits About Money: https://bam.kalzumeus.com/archive/buy-now-pay-later/
Kind of glad I was denied now.
Companies like yours make it hard for customers to reach capable representatives and routinely break service promises. Because hey! who cares if we have treated people decently? it has nothing to do with the business model.
There must be dozens of ways to ensure your customer service systems treat people properly, and you're clearly doing none of them.
Don't fix this case, fix your systems.
Whether affirm has this kind of issues as a pattern or not, i don't know. But assuming malintent is not a great pov imho.
> I hope he doesn't. [...] Don't fix this case, fix your systems.
He's literally trying to do exactly that (and acknowledged the customer is pissed and likely can't be bothered to).
How would you hande this situation?
Not the hypothetical "I'd never let this happen", because if you haven't given at least someone a bad customer experience, you didn't have customers.
I personally find Max's (CEO's) response great, and his direct reply and personal note/care is one of the best possible outcomes in this situation. I wouldn't want to discourage this kind of response.
How do you plan to fix THAT.
If you're not already using NPS surveys after customer interactions and then looking at the detractors on how to improve your service, you should start now. Could be really enlightening.
There’s a way to provide cost optimized customer service that doesn’t put the burden on the customer to drive the process.
But considering how this particular situation went as-is, I doubt Affirm would handle that request in any useful manner. Then again, I feel like this was a bit of an unusual situation that Affirm's customer service people were not well-equipped to handle (most people probably don't send chargebacks to Affirm), but perhaps Affirm does have a playbook for cases where a customer pays for something that isn't delivered.
So I'd agree that Affirm might not be the most appropriate target for a chargeback in this instance, but there might not be other options to get the merchant to send the goods. OP should have at least contacted Affirm before issuing the chargeback, though, since that's something of a nuclear option.
My car loan processor accidentally double charged my $5k loan payoff (and it didn't bounce). Customer support told me the only way to get back my money quickly would be to report fraud through my bank on the 2nd charge, which I did and the 2nd charge was returned within 2 business days. Then several weeks later I get snail-mail confirmation that my loan had been paid off and a certificate indicating this, along with a check for $5k from the lender. I called their customer support but they told me they are sorry but unfortunately since the account was already marked as paid out and those funds disbursed, I would "have" to keep it, so I gladly cashed the $5k check thereby getting my final $5k payoff of my vehicle for free thanks to the lender's mistakes.
Admittedly this is not how most people are using Affirm, but it's definitely been useful to me in that way.
You should not simply assume that you have access to more dollars just because inflation is rising. If your prices go up but your income does not, or your income significantly lags (anyone who got a pre-emptive inflation raise let me know, otherwise it always lags), you're paying for today's inflation with dollars from last year.
Does Affirm report paid-off loans to credit agencies?
https://bam.kalzumeus.com/archive/buy-now-pay-later/
Also discussion thread for aforementioned piece: https://news.ycombinator.com/item?id=29841940
You've also seen credit card companies change their offerings to compete with the BNPL model. One of my credit cards has a "plan it" feature for large purchases, which allows you pay it of in a shorter period of time for a lower interest rate and without incurring interest charges on your month-to-month purchases.
For every person using this to their advantage as a credit tool, I bet there are a dozen who are just sinking deeper into their debt quick sand.
Quoting on-demand loan pricing with clearer upfront payment amounts is more intuitive to consumers than “putting it on the credit card”.
Also for bigger purchases, it's better than a credit card. I pay my Amex balance off every month, but during the pandemic I used Affirm to purchase a home gym setup, and paid it over the course of 6 months at a much lower interest rate.
They are definitely not predatory in my view, but I don't have the perspective of a low-income person anymore.
Might as well just go with your bank itself, instead of adding another 3rd party merchant into the mix.
This depends on the timing of your transaction and your statement date. If you purchase something 1 day before your statement date, and you don't pay it off that same day, you will accrue interest.
Asked and answered? Majority of Americans have credit cards. An awful lot still don’t, and have shit financial situations that make getting one pretty hard. This is a widely documented phenomenon.
Agreed about them being predatory. They literally lose money for every person that uses their service in the recommended/correct way, and only make money when someone flubs a payment.
Merchants will pay affirm a large fee for conversion benefits (e.g better a customer pay $700 even if I lose $50 to affirm fees than for them to pay $0 because they got spooked by the price). Affirm gets the fee. They suffer risks from inflation and nonpayment. Hopefully for them one is larger than the other.
Not in my experience in NY. Some decades ago in NY, I had a problem cancelling a gym membership within legally specified rights. Got nowhere. Sent a letter to the AG, and suddenly like magic, the clouds parted and the matter was resolved in my favor. MA AG is also very responsive.
The real scumbags often will not pay attention, but any biz that has the slightest interest in being around for the long term will definitely take notice when the AG starts to get involved. It is a hornet's nest you do not want kicked anywhere near you.
That's PayPal's fault then. If they don't make things right, you're justified to hold them to account.
We don't know if he bought a mattress or not. I did. Years ago. And the fact that people online don't like Casper is neither here nor there. It's fine. It's a mattress. It's better than a spring mattress.
I merely brought it up because I used Affirm to purchase it because that was the option given to me by Casper for their "pay in X in Y months" option.
Complaints are a big deal for these banks and fintechs; if the complaint level gets high, the auditors show up and plant themselves in the office and start digging. And when they start digging, they find things... things that end in public fines and damaging press releases.
Systems exist and while they're not perfect you should at least try to use them before giving up and talking about how ineffective everything is.
"Everything" in the micro sense, sure. "Everything" in the macro sense, well, that's literally the job description of CEO, so it sounds like you think the CEO does not deserve criticism. If customer service is not working to the benefit of customers, I'd say that's something a CEO should already be aware of and represents a lack in organizational awareness, which compromises executive duties.
Just because the job is hard doesn't mean we should give anyone a break. Assuming the role and responsibilities of CEO is completely voluntary.
I don't think anyone is assuming malice; intent has nothing to do with this. The outcome of each interaction is only what matters here.
But let's entertain what you said is true.
What if this is a recent regression that even his people (c-level, vp level etc) is trying to solve recently?
Assuming CEO has visibility into every macro thing(who decides what is macro?) at any given point in time is not fair, especially these days when there is so much economic volatility to be honest, which impacts his company more than many others.
He doesn't get a pass because he is the CEO. I believe him to be a decent humble person, that will make a honest attempt to address this specific problem and at large.
That's all.
I would ask my VP for customer service to explain the state of the operation and why this case is such a mess. Who knows, maybe they aren't getting adequate resources or support. I'd do a deep dive: - What are our average call hold times? standard deviations? what is our response to outliers? - How do we QC these calls? - When we promise to contact a customer, what is our average response time? standard deviations? what is our response to outliers? - How do we QC the quality of those responses? - What are our escalation procedures? How often / effectively are they invoked? - What is our track record with credit bureau reports -- how often are they challenged? what is the outcome of those challenges? - What is our plan for customer service? How do we know it is properly resourced?
I'd expect answers to these questions in a day or so, if they can't answer these quickly they aren't the right person.
I would be preparing to tell my board, subject to the answers received above, that we have serious problems in customer support, we need new leadership/strategy there, and this might be expensive.
These are the guesses of a zero-management experience dude. I'm sure a real CEO would have a better list -- but they should be doing something serious about problems that are clearly systematic.
He probably got notified by someone in the company that this is getting attention, he felt responsible so he responded AND got people to pull numbers for example.
The smart folks reading this thread have just learned that its wise not to do business with affirm because its not worth the hassle.
We would get issues all over the place. 99% was publisher bug, but it would help us detect patterns and potentially improve the API, or onboarding flow etc. On the 1% we would sometimes figure out later because support Frontline didn't realize the issue properly and we had to address it few months later.
All that is is a feedback. I believe we tried to do better by people but our scale probably grew faster than our process could scale.
And i say this as a victim of Google's account support (or lack thereof). It is horrible, but you figure nothing is perfect.
"Smart folks" tend to know how sausage is made and take things into account and not simply abandon. Don't project your own opinion on others.
Still the point is Affirm was the wrong target for their chargeback and the OP should have contacted Affirm to potentially resolve the merchant not delivering the goods or a refund of the loan.
Merchant > Affirm > OP Bank
(It sounds like it’s more complex than this, but I doubt Cross River has significant exposure to Affirm loans.)
So I'm not saying whether or not OP would have gotten their money back had they went directly to Affirm- just that they should have given Affirm the chance. And none of this excuses Affirms allegedly bad customer service in this situation.
There wasn’t an issue with Affirm not paying the money onward, why go to them.
Once again, Affirm have agreed to give credit to this company, that relationship is theirs. If their client isn’t fulfilling their duties it’s Affirms problem too.
Credit cards work like this, you pay your 2-4% fee and you’re guaranteed what you expected to receive.
Hence why airlines changing peoples tickets out for credit during the pandemic was easily routed around via a cc charge back.
I literally had the Turkish government change the law on my ticket to say the airline didn’t have to fly me but could swap my ticket for credit and I still made it away with my money in the end.
Again, they didn't even know there was a problem because the author never brought it to their attention before the chargeback.
The author borrowed money from Affirm and agreed to pay it back. He's in breach of his contract with Affirm, over a dispute with the merchant (a different party).
By acting as the intermediary they are the only party that received the posters money and ergo the only and appropriate party to claw the money back from. This is no different from buying a widget on amazon. Failing to receive the widget. Initiating a chargeback for the money.
Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Indeed its not really any different from a direct retail purchase where you buy a box and if you open the box and instead of nice new widget you find one that looks like it was mauled by a bear. Can you imagine going to the returns counter and being told despite paying us your money at our point of sale you need to fly to china and sue them if you want your money back. It's just not how the universe works.
They most likely actually CAN'T take money and deliver nothing and make it someone else's problem if they both want to do business in the US and keep doing business with credit card issuers here.
You still owe them the money. The airline can stop you from boarding a future flight. Chargebacks are not magic debt elimination tools.
https://amp.theguardian.com/business/2021/oct/12/ryanair-ban...
They didn’t, they backed out and handed the money back. 1600usd.
The concept that I still owe them money after they were unable to fulfill their duties is laughable, so much so, they wouldn’t even back themselves.
Edit, just to make it clear cc chargebacks aren’t some hit and run scheme
To get to the point I did. I had to
1 convince my bank I was right before they opened any dispute
2 defend myself against evidence the airline put forward saying they were right
3 wait 164 days for my money
And 1600usd vs never using Turkish airlines again… I’ll take the money.
You got 2 contracts here, one to pay back a loan, an another with the merchant, and sadly, when you don't pay back a credit, it get on your credit report...
So the one to contact, is Affirm, just like the one to contact in case of issue with a payment you made, is your credit card provider, and not your bank.
Your money flows from you -> affirm -> merchant in a singular transaction that is actuated by several automatically scheduled payments at the appointed dates.
No transaction flowed between you -> merchant to charge back. Given that actually litigating a dispute in multiple states would be thousands of dollars your only actual options are let them keep all your money even if they are in effect defrauding you OR issue a chargeback to the party that collected your money and let THEM handle retrieving any money transferred from them to the merchant who ultimately didn't fulfill their duty.
You will note that due to the high cost of retrieving your money the merchant has absolutely no reason not to just keep your money and ignore your phone calls. They after all already have the money they were going to make off you. It cannot afford to not pick up the phone for Affirm because it intends to via its continuing relationship to continue making money.
Fundamentally every transaction you undertake is intermediated usually through a multitude of levels whoever actually takes your money be it affirm or walmart has no right to be paid if the goods aren't delivered and acquires in addition to your money the obligation of making the customer whole first and then seeking redress up the food chain.
This is only untrue when there are two distinct different not directly related transactions. Get a generic credit card and use it to buy a TV for example. It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
A situation whereby a singular purchase actuated by a button click is treated as 2 distinct transactions with virtually no recourse for any sort of misbehavior violates decades of consumer expectations and the ground rules under which we all presently do business. It is surprising and harmful.
Yes - we gave people with poor credit mortgages to buy homes, and yes that did lead to the financial crisis, but not because they were poor and had bad credit.
It was because the loans were very large, and were backed by the supposed value of the home the person was buying. Then packaged in ways that hid the risk until the last minute - making those assets toxic when the housing bubble popped.
For small personal loans, there are not the same sort of systemic risks.
There's not a single Affirm tradeline on any of my credit reports.
https://helpcenter.affirm.com/s/article/reporting-to-credit-...
Source? I thought it’s 2 to 3%.
Affirm and similar were 6% last time I talked to them (admittedly 3-4 years ago), and represented a far superior value proposition for a lot of customers because it gives them a longer period of time and forces them onto a payment schedule.
https://www.valuepenguin.com/credit-card-processing/intercha...
I think a better analogy would be you bought a house, but you find out later the seller lied about something (maybe they didn't install a new roof like they claimed), so you think the best course of action is to stop making mortgage payments to your bank.
> Regardless of whether amazon was actually responsible for providing the widget they received your money and ergo they are responsible for giving it back.
Yeah, after you request a refund from them. Try issuing a chargeback to Amazon next time you buy something from a 3rd party seller, I think you will have a bad time.
This is 100% not true for third party creditors, at least in the US. They do have a right to be paid, regardless of the services you purchased with that credit.
The only reason that you can dispute your credit card transactions is because congress passed a law specifically requiring this process: https://www.ftc.gov/legal-library/browse/statutes/fair-credi...
This and similar carveouts notwithstanding, any loan you take out, you are required repay, regardless of the experience with the seller.
You are correct that it is inconvenient when you obtain loans with poor conflict resolution processes. However, this does not negate your legal responsibility to pay those creditors. This is why laws like the FCBA were passed.
> It would make little sense for chase to expect to be paid $500,000 for a house it turned out the seller had no right to sell or $50,000 for a car that was never delivered due to mischance. In both cases even though you had agreed to borrow that money the transaction would be unwound and not merely by you. This unwinding in case of a failure by merchant to deliver product financed is an expected part of such an interaction in part because such transactions almost always concern a great deal of money.
This might surprise you, but in the US, you are still legally required to pay your loans in both of those circumstances. This is the entire purpose of products like title insurance. The bottom line is that the bank is not culpable for other people's misdeeds.
In a circumstance where you spend $500,000 on a house that could not legally be sold to you, you would have to take the seller to court to recover that money so that you could pay back the loan. Or, more commonly, you'd contact your title insurance company for recovery, because your bank likely required that you bought title insurance for this exact reason.
There is no level of inconvenience that makes a bank legally liable for something that someone else did wrong.
It is very common to get a credit limit in the range of $10-20k on these cards, one could easily put all expenses on a 0% interest card, make minimum payments and put the amount of the statement balance in a high yield savings account until the promotional interest ends.
In total one would get negative interest in the amount of the rewards (say 1.25% average) plus the 15+ month yield on the cash stored away.
If you pay the balance in full every month - you have spent $2000 on a $2000 mattress by the end of the month. This exposes you to ~30 days of inflation and you will have paid no interest.
If you pay 0% APR over a twelve month period, and make installment payments until making a single lump sum to close out the line of credit at the end of twelve months - you are exposed to something closer to ~365 days of inflation (depending on the installment payments and the lump sum). You will have also paid no interest.
If we assume roughly 7% yearly inflation, you're paying less real value if you take option number two, because you will have paid $2000, but that same mattress is now worth ~$2140 - You are abusing the time differential between purchase and payment to receive a discount.
That said - this is not the majority of folks using these services.
You paid 2022 dollars for a mattress priced in 2021 dollars. Because of inflation, 2022 dollars are worth less than 2021 dollars (each 2022 dollar is worth ~93% of a 2021 dollar, if we have ~7% inflation)
The mattress would have cost you $2000 2021 dollars if you paid for it immediately. But because you paid the 2021 price tag with 2022 dollars, you are receiving a discount: 2000 * .93 = $1860. You are only paying $1860 2021 dollars, vs the 2000 you would have paid.
Now - and this is very important - none of this matters if you're just shoving those dollars under your mattress for a year. You have to be taking advantage of the inflation by buying an asset that holds its real value over time, and then exchanging it back for the nominal value in 2022.
As an example - assume that we have ~7% inflation, and the total stock market is exactly flat: it neither gains nor loses value compared to inflation (its real value stays the same). You have exactly $2000, and the mattress costs exactly $2000.
Option 1: you pay right now. End result: you have 0 dollars.
Option 2: you pay one year from now, and invest the 2000 in the market until then. End result: after 1 year, when you sell you investments, you have 2140 dollars. you pay 2000 for the mattress. End result: you have 140 dollars.
That's the discount.
Now - the Corollary to this is that you have taken on risk. It's possible that the asset you buy won't hold real value compared to inflation. So while you stand to potentially make 140 bucks in a neutral situation, you also might end up losing money on the assets you buy, and not being able to pay the 2000 dollars.
Such is life.
This is essentially borrowing money to invest. It doesn't matter if the investment makes money or loses money the lender will expect payment. This strategy can make a lot of money, but it's also ruined many people. One key thing to watch while implementing this strategy is your debt to assets ratio. Also understand that during a market crash this ratio might change suddenly and dramatically.
I don't make small (sub $10k) purchases on credit, period. Not only is it somewhat risky but it also encourages overspending because it makes the 'pain' of spending money decrease. As for your $2000 mattress, I saved way more money by buying a $600 mattress instead and I sleep like a rock.
Yeah, I don't know why more people don't see it this way.
Everyone seems to agree that you shouldn't eagerly make extra mortgage payments to pay off your home loan ASAP. Because you can pay it off over 30 years and presumably make more $$ investing than whatever paltry interest rate you had on your home loan.
But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?
So what was their reasoning?
In the end it's all math, where some numbers are random variables with the corresponding variance. So this all depends on what rate you get, what returns you expect from the market, what's your risk tolerance, etc.
The "$2000 0% APR mattress loan" is useful because $167/ month is much easier to budget for and doesn't require a huge hit to savings.
One of these is just sane budging, the other is minmax gambling.
Sort of depends on the investments doesn't it?
Sure, if you sink every penny into penny stocks or crypto you are definitely running a huge gamble. On the other hand, there are non-stock market investments that are perfectly safe. Go grab some TIPS/iBonds for the full amount of purchase. Or maybe go a little riskier and grab some bond index funds. Both of those options aren't playing the stock market.
If you wanted something a little more risky but not "throw it all on GME" then grab an ETF like VOO or VTI.
Obviously do what you like. I'm pretty comfortable with my ability to pay off my obligations.
I would never tell anyone how to spend their money, I'm just bringing up a counter point to the conversation.
A lot of people are probably getting used to that idea, and if/when the market turns its going to be messy.
That's basically what a lawsuit is--you sue someone and if they don't respond, you generally win by default, but if they do, you have the burden of proving your facts.
Mileage varies by state. The New York AG tends to make not responding very costly, sometimes debilitatingly so, for companies. A letter copying e.g. the Alabama AG is likely to be ignored.
A quick google indicates both an online form and a phone number specifically for contacting Alabama AG Office Consumer Specialists: https://www.alabamaag.gov/consumercomplaint
Okay, fine, so that's the reason we don't like borrowing money to invest.
Now explain why it's good to have a mortgage at all? Don't just say "because a couple hundred a month is a small number". That's not a reason, it's just a single, incredibly subjective and situational factoid. Is there a logical or mathematical reason not to increase the amount of my mortgage as long as I can easily afford the monthly payment?
No, but it was a specific example cited by a prior corporate counsel. (We had an irate customer from New Jersey copy their AG. We were informed that Trenton is no Montgomery, the message being that if we didn’t promptly and properly respond their AG’s office would get involved.)
I live in Wyoming, by the way—our AG is likely also easy to contact but hard to get to follow up from. One of the trade-offs of living in a small-budget state.
https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
I recently had a non-renewal on my homeowner's insurance so I had to get new homeowner's insurance. Through a whole bunch of stuff, I wound up effectively sending three payments to two separate insurance companies. I had to float about $7000 - $8000 for a bit.
The insurance agent I had found seemed to be a bit inept, so I wasn't confident they had everything set up properly. Because when I called my mortgage company, they had no clue I was changing insurance companies. They had already submitted payment to the old insurance. I eventually found out how to pay the insurance on my own and just did that. And how to update my insurance information online. Then my escrow paid the new insurance company. So now I had three payments to two companies. And I had to pay into my escrow to cover the double payment. I was prepared to fight both of these companies to get them to cut checks back to me, but just as I was steeling myself for a day of talking to hapless customer service agents, the refund check from the wrong insurance came in. Then a week later, the refund check from the second payment to the correct insurance came in.
But yeah. I wanted to make sure I didn't have a lapse in coverage and then had to cover my escrow shortage. I technically could have waited for everything to sort out, but I didn't want to find out what would happen if things hadn't landed right.
I don’t really understand what financially competent person is using affirm. Generally when it comes to buying small nonessentials, if you can’t afford to pay for it now, the prevailing wisdom is don’t find a way to buy it, just do without.
I’m also curious to hear what the experience is like when you need to return something that was bought with affirm? Do they cancel the loan quickly? It appears their cs dept is under trained and doesn’t have the tools necessary to do a good job.
Another aspect of that is that if you opted out of arbitration is that small claims is a huge hassle for large companies. They will usually deal with you rather than fly some lawyer in.
If you didn't, well, arbitrators are paid by your opponent, and their decision score cards reflect that.
