I hope you’re ready for this. PayPal’s cofounder, Max Levchin, has found a new way to help you submerge yourself up to your nose in debt: a scheme whereby you can get yourself into revolving debt for each purchase individually. That’s as opposed to racking up a single gigantic unpayable debt at 21%.
Basically what it amounts to is a short-term loan, essentially unsecured, upon which you will disgorge specified installment payments. It appears to be essentially an agreement between you and a merchant, set up through a system called Affirm. You buy a given item from a merchant who accepts Affirm; as part of the transaction, you have to give the merchant a great deal of private, highly hack-worthy private information: phone number, name, birthday, and last four digits of your Social Security number — transmitted via your smartphone (!). Within seconds, you have a loan that locks you into payments for three, six, or twelve months.
This arrangement supposedly improves on a credit card because, says Levchin, it’s “more transparent”: i.e., you know exactly what your monthly payment will be, as opposed to seeing the balance balloon quietly every time you fail to pay your credit-card bill in full. And, it’s alleged, the APR will be lower than a credit card’s.
It’ll be a boon to retailers, we’re told, because when suckers are presented with a cheap, low-interest instant loan, they’re a lot more likely to buy stuff they don’t need. Or do need but can’t really afford…
Affirm’s target market is “people with thin credit profiles, such as immigrants and millennials who have chosen not to use credit cards.”
Could it be that millennials, notorious for paying in cash, don’t use credit cards because they’re already in debt over their heads with college loans? Could it be that some immigrants come from cultures where people don’t do stupid things like going into debt to buy a lot of junk they could live without until they can afford to pay for it?
The effect of this scheme will be to hook people into not one or two credit-card bills but a whole array of monthly bills for this, that, and the other purchase. Instead of one bill on, say, a Visa card, you’ll owe a mattress company, a department store, a home improvement store, a furniture store, a you-name-it merchant.
Imagine the chaos you could infuse into your financial life with this thing! And consider that the people it targets are exactly the people who can least bear financial chaos: people who can’t afford revolving credit-card debt.
It’s brilliant, I tell you. Brilliant!
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“It’s a jungle out there!”….Corporations are just shooting themselves in the foot…IMHO…..I discovered a new business strategy at of all places Verizon….My “Dear Widowed Mom” shared that both her land line bill and cell phone bill have gotten out of control….about $90…. each. So I went on line to look at the choices of land line plans….no dice….You can find FIOS…Double Play….Triple Play….But no just phone plan….So I called the local Verizon “corporate store” AND….they only handle cell phone problems BUT he was unable to handle my cell phone problem BECAUSE of course I need to come in the store. And of course he had no clue how one would change or shop for service. Makes me glad I have my “pay as you go phone”…..no hassles!