So, you’ve seen the advertisements offering you a chance to “Buy Now, Pay Later” – the payment plan that spreads your purchase over four equal monthly payments. Basically, it’s the standard credit card “Four months same as cash” or “Free financing for four months” offers that have been around since your parents were wearing diapers.
What’s different today is that a bunch of start-ups, funded by huge investment pools, are jumping into this lending business that is really not much more than a lightly-regulated twist on old-school “payday lender” and sub-prime credit card lender models.
Read the fine print.
What I find interesting is the lack of transparency on the fees if you don’t pay off your purchase in four months, or you’re late on one of those payments. In fact, the fees and interest charges are onerous – well over 25% interest charges, on top of hefty late fees. I find it odd that no one in the media talks about the consequences of being late, missing a payment, or not paying off that wardrobe purchase within the timeline.
While it’s been years since I managed “No interest for 90 days – same as cash” promotions for major credit card issuers, I can tell you with certainty that many people don’t or can’t follow the rules, and get slapped with hefty fees, penalties, and interest charges. Back in my day, it could be as much as 10% to 15% of BNPL borrows missed a payment and got dinged with fees and charges. Of course, the credit issuer made a lot of money on people who were late, so from an issuer point of view, that’s where the money is and making money on credit card late fees and interest charges is a good thing.
Apple Pay Later Finance Charges
So, with the launch of “Apple Pay Later” I tried to find the fine print on the fees if I bought an Apple product, and was one of the 10% (my guess) of the folks who were at risk of not following the rules. It wasn’t easy, since the information was difficult to find, hard to read the small fonts, and lack of the usual “Schumer Box” – the table listing the rates and fees that apply to a particular credit card. This “box” is required to be disclosed in a standardized format at the top of every cardmember agreement as part of the Truth in Lending Act. But, it was missing on the Apple Pay Later webpage on Apple.com. Whether that’s legal or not, I’ll leave it up to the lawyers to decide. But as a consumer, it’s information that’s important for making informed decisions when borrowing money.
Here’s what I found: https://www.apple.com/apple-card/monthly-installments/
“Apple Card Monthly Installments (ACMI) is a 0% APR payment option available only in the U.S. to select at checkout for certain Apple products purchased at Apple Store locations, apple.com, the Apple Store app, or by calling 1-800-MY-APPLE and is subject to credit approval and credit limit. See support.apple.com/kb/HT211204 for more information about eligible products. Variable APRs for Apple Card other than ACMI range from 12.49% to 23.49% based on creditworthiness. Rates as of July 1, 2022. If you choose the pay‑in‑full or one‑time‑payment option for an ACMI‑eligible purchase instead of choosing ACMI as the payment option at checkout, that purchase will be subject to the variable APR assigned to your Apple Card. “
I’d love to hear from Apple of they have a different opinion about the subject, or if they think I’ve got their fees on BNPL all wrong.
Not being clear and conspicuous about the hidden fees of BNPL is really not in “good taste” – something my mother would say when us kids did something that she thought was wrong.